COAL  IRON  AND  WAR 


A  STUDY  IN 
INDUSTRIALISM  PAST  AND  FUTURE 


By 
EDWIN  C.  ECKEL 

Assoc.  Amer,  Soc.  C.E,,  Fellow,  Geol.  Soc.  America , 
late  Major,  Engrs.,  U.  S.  A, 


a  *     ""  ■>    ?     '     ,' 


NEW  YORK 

HENRY  HOLT  AND  COMPANY 

1920 


^-.^\ 


^^ 


Copyright,  1920 

BY 

HENRY  HOLT  AND  COMPANY 


TO  FRANCE 

THRICE  SAVIOUR  OF  CIVILIZATION 

CHALONS— TOURS  —  MARNE 


43462( 


u 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/coalironwarstudyOOeckerich 


CONTENTS 

PART  I 
THE  GROWTH  OF  MODERN  INDUSTRIALISM 

CHAPTER  PAGE 

I    The  Leadership  of  England 3 

II    The  Development  of  America 17 

III    The  Growth  of  Germany 48 

IV"    The  Retardation  of  France 61 

V    The  Stirring  in  the  East 68 

VI    The  Struggle  of  the  Nations 74 

VII    The  Causes  and  Effects  of  Industrialism      .  87 

PART  II 

THE  MATERIAL  BASES  OF  INDUSTRIAL 
GROWTH 

VIII     The  Material  Bases  of  Civilization      .     .      .  93    ^ 

IX    The  Coal  Resources  of  the  World      ...  99  - 

X     Petroleum,  Natural  Gas  and  Water  Power  .  117 

XI     Iron  Ore  Supplies  of  the  World      .     .     .      .  135  >- 

XII     The  Supply  of  the  Precious  Metals     .      .      .  142 

XIII  The  Supply  of  Commercial  Metals       .      .      .  153 

XIV  Chemical  and  Structural  Materials     .     .      .177 

PART  III 

THE  CAUSES  AND  EFFECTS  OF  INDUSTRIAL 
GROWTH 

XV    The  Factors  of  Industrial  Evolution  .      .      .  187  7 

XVI     The  Progress  of  Invention  and  Discovery      .  201  "7 

Xyil    The  Rise  and  Fall  o^  Prjces      ...     .     .     .,     .  225, 


V 


CONTENTS 

CHAPTER 

XVIII    The  Share  of  the  Worker     ... 
XIX    The  Development  of  the  Corporation 
XX    Legislative  Helps  and  Hindrances   .     , 


PAGE 
244 

270 


PART  IV 

THE  FUTURE  OF  INDUSTRIALISM 

p-  XXI  The  Nature  of  the  Problem 283 

XXII  The  Progress  of  Political  Beliefs  ....  288 

-'-XXIII  The  Trend  and  Rate  of  Future  Growth  .     .  305 

^^XXIV  The  Factors  of  World  Competition      .     .      .317 

-y^  XXV  The  Future  of  World  Competition      .     .      .  325 

^XXVI  Industrialism  and  War 346 

XXVII  The  Forms  of  Future  Progress 358 


Index 371 


I 


INTRODUCTION 

Since  our  existing  differences,  both  within  the  nation  and 
between  the  nations,  are  based  largely  upon  different  inter- 
pretations of  actual  facts,  there  is  always  the  difficulty  that 
discussion  of  political,  social  or  industrial  movements  or 
conditions  may  be  biassed,  in  one  way  or  another,  by  the 
underlying  beliefs  of  the  investigator.  This  is  notably  true 
with  regard  to  current  discussions  of  the  growth  and  status 
and  future  of  the  existing  industrial  system;  for  here  we 
meet  with  very  great  differences  both  of  interpretation  and 
of  opinion. 

Among  critics  of  existing  conditions  —  and  most  of  the 
contributions  of  to-day  are  essentially  critical  —  there  is  a 
general  tendency  to  start  with  certain  assumptions  as  to  the 
righteousness  or  wickedness  of  private  property,  of  individ- 
ual capitalism,  of  protection  or  free  trade,  of  competition  or 
of  government  regulation,  and  of  all  the  other  basal  factors 
involved  in  the  matter.  Starting  in  this  way,  there  is  in 
many  cases  the  additional  tendency  to  look  upon  industrial 
growth  as  a  matter  largely  under  human  and  personal  con- 
trol, and  hence  one  which  can  be  praised  or  blamed  from  a 
purely  ethical  point  of  view. 

As  a  matter  of  fact,  in  dealing  with  the  industrial  develop-. — . 
ment  of  any  country,  we  are  considering  a  phenomenon  which  I 
is  to  a  very  large  extent  a  phase  of  purely  natural  evolution; 
and  any  discussion  which  lays  undue  stress  upon  either 
personal  or  racial  factors  must  be  regarded  as  being  histor- 
ically defective.  The  results  of  the  broader  industrial 
changes  may  be  good  or  bad  for  the  community,  but  they 
are  rarely  if  ever  due  to  conscious  and  intentional  planning 
or  direction. 


INTRODUCTION 

On  the  other  hand,  we  must  not  fall  into  the  opposite 
error,  and  reason  that  because  a  thing  exists  to-day,  it  is 
therefore  necessarily  just  and  wise  or  necessarily  fixed  and 
unchangeable.  If  there  is  evolution,  there  will  be  change; 
and  since  we  are  dealing  with  industrial  and  social,  rather 
than  with  purely  physical  evolution,  the  change  is  to  some 
extent  capable  of  human  control  and  guidance.  It  is  not 
necessary  to  assume  that  our  existing  type  of  machine  civili- 
zation is  the  best  possible  type;  it  is  not  even  necessary  to 
assume  that  it  is  a  really  good  type.  Those  are  matters  for 
individual  opinion  and  decision.  But  it  is  absolutely  neces- 
sary to  realize  that,  whatever  its  merits  or  defects,  it  has 
come  about  in  a  very  natural  manner;  and  that  there  are 
some  purely  physical  factors  which  will  serve  to  limit  the 
amount  of  change  that  human  will  can  introduce. 

In  the  present  volume  an  attempt  will  be  made  to  reverse 
the  ordinary  order  of  discussion,  by  outlining  first  the  history 
of  the  industrial  development  of  the  leading  nations,  from 
the  beginnings  of  modern  industrialism  until  the  close  of  the 
World  War.  In  tracing  out  the  main  stages  of  this  develop- 
ment, stress  will  be  laid  chiefly  upon  the  growth  of  the  coal 
and  iron  industries,  not  merely  because  of  their  basal  char- 
acter and  importance,  but  because  such  limitation  will  aid 
in  giving  definltehess  to  the  study.  On  the  other  hand  by 
tracing  industrial  growth  abroad  as  well  as  at  home,  we  are 
freed  from  the  danger  of  local  bias,  which  has  too  often 
affected  discussion  of  the  development  of  our  modern  indus- 
trial system. 

In  the  course  of  this  historical  sketch,  it  will  be  found  that 
at  intervals  we  meet  with  factors,  some  physical  and  some 
human,  which  seem  to  have  affected  industrial  growth  in 
different  countries  and  at  different  times.  Some  of  these 
factors  have  apparently  caused  or  incited  growth;  others 
have,  changed  its  rate,  or  altered  its  direction,  qr  limitqd  its 


INTRODUCTION 

extent.  It  will  be  profitable  to  study  these  factors  separ- 
ately, in  the  light  of  the  facts  that  have  been  brought  out 
during  the  preceding  historical  discussion. 

Finally,  having  thus  treated  of  industrialism  as  it  has 
actually  developed,  and  of  the  factors  which  have  permitted 
or  influenced  it,  there  remain  to  be  considered  the  effects 
which  the  system  itself  has  produced  on  the  community. 
Here  we  reach  consideration  of  how  it  has  affected  political 
and  social  developments  as  between  citizens,  in  the  nation 
itself,  and  of  what  its  future  trend  appears  to  be  in  these 
lines.  But  we  also  are  forced  to  consider  how  it  has  affected 
relations  between  the  nations  as  units,  and  how  future  social 
and  international  relations  are  likely  to  be  affected  by  what 
we  now  know  of  the  uneven  manner  in  which  the  material 
resources  on  which  industrialism  rests  are  distributed  over 
the  earth. 


PART  I 
THE  GROWTH  OF  MODERN  INDUSTRIALISM 


CHAPTER  I 
THE  LEADERSHIP  OF  ENGLAND 

In  following  out  the  growth  of  modern  industrialism,  it 
is  necessary  of  course  to  commence  with  its  development  in 
Great  Britain,  where  its  effects  were  shown  first  and  most 
strikingly.  The  very  suddenness  and  completeness  of  the 
change,  in  fact,  creates  difficulty  in  appreciating  its  extent, 
for  the  industrial  leadership  which  England  then  established 
lasted  so  long,  and  was  so  preeminent,  that  it  is  hard  to 
realize  a  time  when  conditions  were  very  different.  But  in 
order  to  get  a  proper  background  for  this  sudden  develop- 
ment we  have  to  go  back  to  a  time,  not  so  far  distant  it  will 
be  found,  when  Great  Britain  was  not  a  country  of  great 
importance  either  in  shipping  or  in  manufactures.  This  was 
the  case  during  all  the  early  centuries  of  her  history,  and 
though  England  had  shared  in  the  great  expansion  of  trade 
brought  about  by  the  discovery  of  America,  her  share  for  a 
long  time  was  small  compared  to  that  of  Spain  and  Holland. 

Even  as  late  as  the  middle  of  the  eighteenth  century, 
England's  Industrial  future  was  by  no  means  certain  or  as- 
sured. The  manufacture  of  woolen  goods,  taken  up  much 
later  than  In  France  and  Germany,  had  at  length  been 
brought  to  a  point  of  importance,  and  the  time  had  definitely 
gone  by  when  all  of  England's  exports  consisted  of  raw 
materials,  such  as  tin,  lead  and  wool.  But  the  iron  Industry 
had  not  secured  a  firm  foothold,  and  at  the  time  we  note, 
it  had  in  common  with  some  other  Industries,  reached  a 
point  of  extreme  depression.  The  English  Iron  output  had, 
in  fact,  declined  steadily  for  several  decades,  and  to  anyone 
studying  the  matter  in  1750,  It  would  doubtless  have  been  a 

3 


4         A  i  •>  ;*  r :  ;-(?QAL;  IRON  AND  WAR 
.'' : :'  i  .*":  •.•  '::  ..:;•*.  *  ^ 

very  fair  conclusion  to  assume  that  in  a  few  more  decades 
the  British  iron  industry  would  be  entirely  extinct,  and  that 
the  future  iron  supply  of  the  world  would  be  secured  from 
Sweden  and  Russia,  and  perhaps  the  American  Colonies,  all 
of  which  then  equaled  or  surpassed  Great  Britain  in  iron 
output. 

If  the  investigator  of  1750  had  been  warned  that,  during 
the  sixty  years  which  were  to  follow,  England  would  fight 
practically  all  of  Europe,  not  once  but  in  three  successive  and 
long  wars,  and  that  the  more  important  of  the  American 
colonies  would  be  lost  early  in  these  struggles,  his  ideas  as  to 
the  future  industrial  and  political  standing  of  Great  Britain 
might  have  been  even  more  pessimistic.  There  was  appar- 
ently nothing  on  the  industrial  horizon  to  offer  hope  for  the 
British  iron  industry  in  particular,  and  yet  it  was  on  the 
verge  of  such  an  expansion  as  the  world  had  never  seen  be- 
fore in  connection  with  any  industry  in  any  land.  Further- 
more, this  great  expansion  was  to  come  not  only  in  this  one 
great  basal  industry,  but  it  was  to  spread  out,  enlarging  and 
remodeling  the  entire  industrial  structure  of  the  country, 
and  to  ultimately  bring  about  great  social  and  political 
changes. 

Before  the  dawn.  It  will  be  advisable  to  get  some  idea 
of  the  general  industrial  situation  in  England,  and  for  that 
matter  elsewhere,  just  before  the  beginning  of  the  period  of 
rapid  expansion  in  manufactures.  It  must  therefore  be  re- 
called that  at  the  date  which  has  been  selected  for  conven- 
ience as  marking  the  approximate  ending  of  the  old  and  be- 
ginning of  the  newer  type  of  industrialism,  most  industries 
were  still  of  the  household  or  neighborhood  type,  carried  on 
by  individuals,  by  families,  or  by  very  small  groups  of  em- 
ployed workers.  The  power  available  for  manufactures 
was  merely  manual,  except  that  in  favored  localities  a  small 
water  power  development  was  in  use.  The  steam  engine  — 
of  modern  type  —  did  not  exist,  though  a  few  engines  of  the 
Newcomen  type  were  in  use  for  pumping  out  coal  mines  at 


THE  LEADERSHIP  OF  ENGLAND  5 

least.  Transportation  of  commodities  was  not  a  matter  of 
prime  importance,  for  when  production  was  on  such  a  very- 
small  scale,  the  commodity  could  in  general  be  made  close  to 
its  market.  If  there  had  been  any  need  for  transportation, 
there  were  of  course  no  railroads,  there  were  no  canals,  and 
the  common  roads  were  very  bad  indeed.  Coal  was  used 
chiefly  as  a  domestic  heat  producer,  and  since  there  were  no 
adequate  means  for  unwatering  the  coal  mines,  both  its  con- 
sumption and  its  production  were  limited. 

Under  these  conditions  the  result  was  a  small-scale  and 
widely  scattered  production  of  most  manufactured  commod- 
ieties.  There  was  no  way  under  which  large  accumulations 
of  capital  could  be  profitably  applied  to  industry  under 
such  conditions;  and  even  if  the  way  had  been  open,  there 
were  few  large  individual  or  corporate  accumulations  of 
capital  to  be  so  used.  Finally,  and  this  is  the  point  in  which 
we  are  at  present  most  interested,  there  was  no  indication 
that  these  conditions  would  not  persist  for  a  long  time  to 
come;  there  was  no  mtimatlon  that  within  a  half-century 
this  type  of  British  industry  was  to  be  swept  away  as  com- 
pletely as  had  been  the  ancient  civilizations  of  the  East.  In 
1750  as  in  the  hundreds  of  years  preceding,  politicians  talked 
of  ancient  prerogatives  or  of  ancient  rights;  jurists  bowed 
before  ancient  law;  philosophers  dreamed  of  ancient  free 
states :  and  all  the  while  the  thing  that  really  mattered  was 
unheralded  and  unnoted  —  the  fact  that  a  new  industrial- 
ism was  beginning  to  take  shape  —  an  industrialism  which 
would  eventually  shatter  all  these  ancient  privileges  and 
dreams  and  theories  against  the  hard  facts  of  modern  life. 

The  awakening  in  England.  It  has  been  said  that  the 
appearance  of  the  new  type  of  industrialism  was  sudden  — 
and  In  truth  Its  most  striking  manifestations  were  grouped 
together  within  a  few  decades,  though  their  effects  have 
lasted  until  the  present  day.  Between  1760  and  18 10  the 
organization  of  British  industry  was  changed  throughout, 
and  the  bulk  of  the  changes  were  at  least  commenced  during 


6  COAL,  IRON  AND  WAR 

the  first  three  decades  of  that  period.  During  that  brief 
space  of  time  came  a  series  of  remarkable  improvements  in 
spinning  and  weaving  machinery,  which  would  make  it  both 
possible  and  profitable  for  the  textile  industries  to  group 
workmen  in  factories  or  other  large  operating  units  if  the 
necessary  power  could  be  secured.  And,  as  if  in  prompt 
response  to  this  demand,  came  the  modern  steam  engine  to 
furnish  the  power.  The  steam  engine  furnished  power  not 
only  to  the  manufacturer,  but  it  enabled  economic  pumping, 
deepening  and  hoisting  at  the  coal  and  iron-ore  mines,  so  that 
the  fuel  and  ore  required  by  the  new  industrialism  could  be 
provided  cheaply  and  in  ample  quantities.  And,  in  turn,  the 
engine  required  better  steel  and  better  shopwork  than  had 
been  needed  previously,  both  of  which  requirements  were 
met  by  inventions  and  improvements.  Finally,  the  grouping 
of  the  industries  in  large  units  having  now  become  feasible 
and  economically  necessary,  the  transportation  of  both  the 
raw  materials  and  the  product  of  these  large  units  became  a 
matter  of  serious  importance.  So  we  have  the  beginning 
of  highway  and  canal  development,  and  a  very  little  later 
the  commencement  of  steam  navigation  and  of  railroads. 

On  examining  this  remarkable  series  of  changes  in  indus- 
trial processes  and  organization,  it  will  be  seen  that  they 
acted  and  reacted  on  one  another  in  very  complicated  fash- 
ion; and  their  grouping  in  point  of  time  was  so  close  that  it 
is  difficult,  in  many  cases,  to  say  which  of  two  changes  was 
the  cause  and  which  the  effect.  Some  of  the  questions  which 
arise  in  that  connection  will  be  discussed  later,  in  taking  up 
consideration  of  the  conditions  which  favor  invention  and 
industrial  change.  But  at  present  we  are  concerned  more 
directly  with  the  fact  that  the  new  organization  of  transport 
and  industry  which  was  brought  about  by  all  these  changes 
had  two  very  distinct  though  related  effects,  not  only  upon 
the  coal  and  iron  trades,  but  upon  most  other  manufactur- 
ing industries.     From  this  time  on  there  were  much  larger 


THE  LEADERSHIP  OF  ENGLAND  7 

and  wider  markets  for  manufactured  products  and  for  raw 
materials,  so  that  tonnages  or  quantities  produced  could  be 
greatly  increased:  and  it  would  also  be  physically  possible 
and  economically  necessary  to  produce  these  increased  ton- 
nages in  larger  and  more  closely  grouped  plants.  The  day 
of  the  small  forge  and  furnace  and  mill  had  passed  away; 
the  day  of  the  small  individual  proprietor,  too  was  passing. 
From  that  day  on  to  the  present  the  trend  of  development 
in  these  two  regards  has  never  changed;  and  the  huge  indus- 
trial plants  and  organizations  of  to-day  are  but  logical  and 
necessary  results  of  the  changes  which  took  place  in  British 
industry  over  a  century  ago. 

The  extent  to  which  the  various  industries  have  been 
developed  in  different  countries  has  of  course  been  deter- 
mined, to  a  very  large  extent,  by  the  natural  and  other  re- 
sources of  those  countries,  a  matter  which  will  be  discussed 
in  detail  in  a  later  section.  The  form  which  the  developing 
industrial  organization  has  taken  also  has  natural  causes, 
but  in  this  case  there  have  been  local  modifications  due 
chiefly  to  differences  in  the  legal  and  political  theories  current 
at  different  times  and  in  different  places.  These  phases  of 
the  subject  will  also  be  taken  up  separately  later.  At 
present  attention  will  be  directed  solely  toward  the  purely 
external  and  quantitative  effects  which  were  brought  about. 

The  extent  of  British  development.  In  order  to  follow 
out  the  new  development  clearly,  and  to  avoid  being  lost 
in  a  maze  of  statistics  and  dates,  it  will  be  well  to  limit  at- 
tention to  the  growth  of  the  British  iron  and  steel  industry, 
which  showed  in  most  typical  form  the  effects  of  the  new 
impetus  which  all  industries  had  acquired  so  suddenly.  It 
will  lend  definiteness  to  the  discussion  if  it  be  so  limited,  and 
in  case  of  necessity  illustrative  data  can  be  drawn  from 
other  industries. 

Aside  from  its  basal  importance,  by  dealing  with  this  in- 
dustry there  is  the  further  advantage  that  fairly  reliable 
data  are  available  as  to  British  iron  output,  even  for  the 


8 


COAL,  IRON  AND  WAR 


earlier  periods,  while  for  later  years  the  figures  are  very 
good.  All  the  results  which  are  really  necessary  for  the 
present  discussion  are  shown  graphically  in  figure  i  on  this 


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Fig.  I. 


O  to  »tk  O  GO 

Annual  Output  in  Millions  of  Tons 

Growth  of  British  iron  industry,  1740-1910 


1740 
1760 

1780 

^1800 

1S20 

1840 

1860 

1880 

1900 
1910 


page.  In  the  upper  portion  of  that  diagram  the  British  iron 
output  is  shown  over  the  period  1740  to  19 10.  'In  the 
lower  portion  of  the  figure  the  average  per  cent,  of  annual 
increase  of  output  for  each  period  is  also  graphically  shown. 


THE  LEADERSHIP  OF  ENGLAND  9 

On  looking  over  the  British  iron-production  figures  we 
can  see  that  the  entire  time  covered  can  be  divided  pretty 
clearly  into  four  periods,  distinguished  by  quite  sharp  differ- 
ences in  the  annual  rate  of  growth  of  the  industry.  Un- 
fortunately there  are  no  yearly  statistics  for  the  earlier 
dates,  so  that  the  exact  limits  of  these  four  periods  have  to 
be  fixed,  in  part,  by  data  obtained  from  study  of  the  indus- 
try in  competitive  countries.  The  periods  in  question  are  as 
follows : 

The  growth  of  markets,  1700  to  1775.  During  this  pre- 
paratory period  the  English  iron  output  as  earlier  stated 
showed  little  or  no  growth;  and  over  a  large  portion  of  the 
period  actually  seemed  to  show  a  declining  tendency.  The 
annual  rate  of  growth  from  1700  to  1775  was,  so  far  as  can 
be  determined,  less  than  one  per  cent.  This  rate  was  far 
lower  than  anything  which  followed  for  the  next  hundred 
years,  and  it  is  not  until  1890  that  English  iron  growth 
again  fell  as  low.  We  have  no  good  population  figures 
prior  to  1800,  but  it  seems  certain  that  during  this  first 
period  the  amount  of  iron  produced  in  England  actually 
showed  a  decreasing  number  of  pounds  per  year  per  capita. 
At  the  close  of  the  period  the  population  of  Great  Britain 
was  probably  in  the  neighborhood  of  eight  million.  The 
annual  output  of  pig  iron  therefor  amounted  to  perhaps 
three  to  five  pounds  for  each  person.  What  this  means  in 
the  way  of  general  use  of  iron  can  only  be  comprehended 
if  we  recall  that  in  the  years  immediately  preceding  the 
World  War,  the  outputs  of  America,  Germany  and  Great 
Britain  ranged  from  five  hundred  to  one  thousand  pounds 
per  capita  each  year.  Later,  in  discussing  the  colonial  iron 
trade  in  America,  we  will  get  some  idea  of  the  extremely 
limited  uses  to  which  iron  was  put  in  those  early  days. 

During  this  preparatory  period  the  growth  of  manufac- 
tures was  not,  indeed,  very  marked  in  any  line,  but  the  forces 
which  were  later  to  incite  rapid  development  were  already 
at  work.     In  studying  English  history  of  the  later  seven- 


lo  COAL,  IRON  AND  WAR 

teenth  and  most  of  the  eighteenth  centuries,  our  attention  is 
ordinarily  drawn  toward  the  political  and  military  struggles 
of  the  time,  so  that  we  note  the  gradual  increase  of  free- 
dom in  British  political  institutions,  and  the  equally  gradual 
increase  in  the  British  prestige  abroad,  without  paying 
much  attention  to  the  commercial  and  industrial  effects 
which  were  being  incidentally  produced.  As  a  matter  of 
fact  the  outstanding  feature  of  the  period,  looked  at  from 
our  present  standpoint,  was  the  growth  of  the  British  colon- 
ial empire,  and  the  development  of  British  trading  enter- 
prise, so  that  access  was  given  to  vastly  broader  markets 
than  had  been  hitherto  possible.  The  British  merchant 
fleet  and  the  British  navy  had  at  last  become  of  the  first 
importance,  in  sharp  contrast  to  the  preceding  centuries, 
when  other  fleets  and  other  navies  had  held  higher  rank. 

By  the  end  of  the  period  we  have  selected  as  that  of  pre- 
paration. Great  Britain  had  broadened  her  overseas  domin- 
ion to  include  all  of  America  east  of  the  Mississippi,  and 
most  of  present  India,  while  to  these  great  protected 
markets  are  to  be  added  the  numerous  scattered  trading 
stations  and  colonies  established  along  the  great  trade  routes. 
Large  and  growing  overseas  markets  were  now  open  to  the 
British  manufacturer  and  merchant,  access  to  which  was 
guaranteed  by  British  shipping.  In  time  of  peace,  there 
were  the  colonial  markets,  restricted  to  British  use  alone 
under  the  system  then  in  vogue ;  in  time  of  war  all  the  neutral 
markets  of  the  world  were  British,  thanks  to  the  navy. 
Under  these  conditions  there  would  be  obviously  future 
growth  of  commerce,  but  there  were  as  yet  no  reasons  for 
supposing  that  this  could  continue  indefinitely,  or  that  it 
could  exist  except  under  the  conditions  of  a  powerful  navy 
and  a  colonial  trade  restricted  to  the  home  country.  New 
and  favorable  factors  were  to  appear  in  the  period  which 
followed. 

The  Industrial  Revolution  in  England,  1 775-181 5.  The 
forty  years  here  grouped  can  be  considered  as  covering  the 


THE  LEADERSHIP  OF  ENGLAND  ii 

period  of  wonderfully  rapid  development  in  all  industrial 
lines  which  is  commonly  called  the  Industrial  Revolution. 
The  dates  of  its  beginning  and  ending  are  naturally  indefin- 
ite, but  for  our  present  purposes  1775  has  been  selected  as 
marking  its  beginning,  so  far  as  the  British  iron  trade  is 
concerned.  That  date  corresponds  closely  with  the  ending 
of  iron  imports  from  the  North  American  colonies  (owing 
to  the  American  Revolution),  imports  which  had  up  to  that 
date  been  far  heavier  than  seems  to  be  generally  understood. 
This  matter  will  be  recurred  to  later,  in  discussing  the  his- 
tory of  American  industrial  development.  Here  it  is  noted, 
because  it  seems  certain  that  in  large  part  the  iron  which 
would  normally  have  come  from  Maryland  and  Virginia 
must  have  been  replaced  by  increased  British  output. 

Of  the  forty  years  included  in  this  period.  Great  Britain 
was  at  war  for  thirty.  The  almost  continuous  struggle 
affected  industrial  development,  but  it  did  not  cause  it.  On 
the  contrary,  it  may  be  said  that  in  spite  of  these  wars  in- 
dustries were  able  to  develop  in  Great  Britain,  thanks  to 
certain  special  features  which  in  her  case  limited  the  evil 
effects  of  the  conflicts.  With  the  exception  of  one  very  brief 
period  in  178 1,  the  British  navy  held  the  seas.  Behind 
that  shelter  crops  could  be  gathered  in  peace,  industries  could 
develop  unchecked,  and  goods  could  be  shipped  to  the 
markets  of  all  the  world.  English  contributions  in  men 
were  not  large,  and  losses  were  light.  At  the  close  of  four 
decades  of  war  Great  Britain  emerged  with  a  largely  in- 
creased population,  with  highly  developed  industries,  and 
an  enormously  expanded  foreign  trade.  Most  of  the 
American  colonies  had  been  lost,  but  the  American  trade 
had  been  held  and  even  increased. 

During  those  forty  years  the  rate  of  increase  of  British 
iron  output  averaged  about  eight  per  cent,  annually.  The 
output  had  risen,  at  the  close  of  the  period,  to  over  eighty 
pounds  per  year  per  capita.  In  other  lines  of  manufacture 
the  increase  had  been  almost  as  great,  and  much  more  strik- 


12  COAL,  IRON  AND  WAR 

ing  in  some  ways,  so  that  in  considering  this  period  attention 
is  often  concentrated  disproportionately  on  the  textile  indus- 
tries, for  example.  The  advances  in  these  latter,  however, 
were  effects  and  not  causes  of  the  industrial  revolution. 
That  had  originated  in  the  forcing  effects  of  ready  access  to 
wider  markets,  and  had  developed  thanks  to  the  coal  and 
iron  resources  of  Great  Britain.  Comparisons  with  the  con- 
dition in  other  countries  at  the  same  period  brings  out  this 
latter  point  very  clearly,  and  when  we  come  to  consider  the 
growth  at  various  periods  of  the  United  States,  of  Ger- 
many and  of  France  we  will  see  the  same  sequence  of  phe- 
nomena repeated  in  each  case. 

Here  we  may  profitably  note  two  points  which  might 
otherwise  be  overlooked,  bearing  on  the  form  which  the 
new  industriaHsm  took  and  on  its  geographic  localization. 
With  increased  access  to  Asiatic  and  the  growing  American 
markets,  there  would  have  been  steady  increase  in  com- 
mercial and  manufacturing  growth  in  any  case,  but  this 
growth  would  have  been  at  a  rate  limited  by  primitive 
methods  of  production  and  transport.  What  gave  this 
period  its  entirely  new  type  of  activities  was  the  improve- 
ment of  the  steam  engine  under  Watts  and  Boulton,  which 
offered  an  efficient  source  of  power.  It  could  be  seen  im- 
mediately that  this  new  power  could  be  developed  in  large 
units,  so  that  a  great  increase  and  concentration  in  manu- 
factures were  possible.  It  would  be  seen  almost  as  quickly 
that  the  new  power  was  not  fixed  in  position,  like  a  water 
wheel  or  wind  mill,  so  that  soon  it  was  applied  to  revolu- 
tionizing the  methods  of  transport. 

The  second  point  relates  to  the  material  conditions  under 
which  the  new  power  could  best  be  developed  —  and  this 
could  be  seen  immediately  to  require  access  to  coal  and  iron. 
At  the  time  Great  Britain  was  the  most  fortunately  located 
of  all  the  nations  with  respect  to  these  two  necessary  ma- 
terials, for  the  coal  fields  of  the  United  States  were  still  un- 
known and  those  of  Germany  were  far  inland.     Steam  ship- 


THE  LEADERSHIP  OF  ENGLAND  13 

ping,  then  as  always,  fell  to  the  nation  which  could  supply 
cheap  bunker  coal;  and  Great  Britain  assumed  a  lead  both 
in  manufactures  and  in  commerce  which  was  retained  for 
over  a  century. 

Undisputed  world  leadership,  181 5-1870.  During  the 
fifty-five  years  which  followed  Waterloo  there  was  great 
and  relatively  steady  industrial  development  throughout  the 
world,  in  which  Great  Britain  took  the  leading  part.  There 
was,  at  the  close  of  the  Napoleonic  wars,  a  decade  of 
serious  depression,  rarely  noted  by  historians  intent  only 
on  political  events,  but  clearly  enough  marked  in  the  indus- 
trial progress  of  the  different  countries.  In  discussing  the 
growth  of  the  United  States  we  shall  see  how  very  diffi- 
cult a  decade  followed  the  peace.  But  around  1825  there 
were  compensations  for  the  losses  of  the  wars,  and  world 
progress  was  resumed.  The  gold  supply  began  to  be 
heavily  increased  from  Russian  and  Siberian  discoveries,  the 
Spanish  colonies  finally  freed  took  up  a  new  growth,  and 
the  United  States  and  Canada  spread  out  far  to  the  west- 
ward of  their  older  settled  limits.  New  markets  again 
brought  new  manufacturing  activity. 

For  the  period  which  followed.  Great  Britain  was  the  un- 
disputed industrial  leader  of  the  world,  and  her  iron  and 
other  great  industries  found  at  least  their  share  of  the 
market.  Cheap  bunker  coal  meant  cheap  freights,  and  im- 
ported food  supplies  permitted  Great  Britain  to  be  turned 
essentially  into  one  vast  workshop.  So  long  as  her  coal 
supply  was  the  cheapest  and  most  accessible  in  the  world, 
there  was  no  reason  to  fear  foreign  competition  at  home, 
and  the  freest  of  free  trade  was  the  obvious  economic  policy 
for  the  England  of  those  days.  Its  advantages  were  so 
very  obvious,  as  applied  to  England,  that  it  began  to  be 
considered  the  only  proper  and  virtuous  policy  for  all  na- 
tions, and  the  fact  that  the  United  States  and  France  and 
Germany  hesitated  to  accept  this  doctrine  was  long  looked 
upon  as  merely  a  sign  of  their  intellectual  inferiority. 


H  COAL,  IRON  AND  WAR 

Later  in  the  period  came  another  great  burst  of  world- 
wide activity,  forced  and  aided  by  railway  development  all 
over  the  world  and  by  great  gold  discoveries  in  California 
and  Australia.  Throughout  all  of  this  time  there  was  no 
war  which  interfered  seriously  with  the  British  export  trade, 
and  only  one  in  which  Great  Britain  herself  was  seriously 
involved.  Modern  industrialism  was  in  course  of  develop- 
ment in  other  countries,  it  is  true,  but  England's  two  great 
future  competitors  were  still  far  in  the  rear,  so  far  as  world 
markets  were  concerned.  Increasing  imports  of  food  sup- 
plies and  of  raw  materials,  such  as  cotton,  were  more  than 
paid  for  by  increased  exports  of  finished  goods  and  by 
freights.  With  regard  to  the  great  basal  industry,  railway 
development  all  over  the  globe  brought  about  heavily  in- 
creased demand  for  new  types  of  iron  and  steel  products, 
and  English  mills  supplied  a  very  large  proportion  of  this 
demand.  With  the  prompt  adoption  of  the  Bessemer  steel 
process,  and  the  growth  of  the  steel  ship,  British  industry 
and  commerce  were  again  favored. 

Considered  merely  quantitatively,  the  British  iron  output 
during  the  years  1815  to  1870  showed  a  very  large  and 
quite  steady  rate  of  increase.  It  was  not  so  large  in  per- 
centage, however,  as  during  the  period  immediately  pre- 
ceding, for  we  see  that  it  averaged  only  five  per  cent,  an- 
nually in  place  of  the  earlier  rate  of  eight  per  cent.  But  it 
was  so  great  that  by  1870  the  British  iron  output  averaged 
about  five  hundred  pounds  annually,  per  capita  of  British 
population.  This  was  a  far  cry  from  the  five  pounds  per 
capita  of  the  century  previous,  and  represented  a  great 
advance  both  in  manufacture  and  in  utilization. 

It  represented  also,  though  one  of  that  day  would  not 
have  had  any  reason  to  know  it,  about  the  high-water  mark 
of  British  industrial  preeminence.  For  just  as  in  1770  a 
new  development  had  come  unheralded,  at  a  time  of  appar- 
ent depression,  so  in  1870  new  competition  was  about  to 
appear,  equally  without  warning,  to  limit  further  growth. 


THE  LEADERSHIP  OF  ENGLAND  %$ 

The  period  when  one  nation  supplied  the  world  with  prac- 
tically all  manufactured  goods  was  about  to  pass. 

Competition  for  leadership,  1870-1914.  The  selection  of 
1870  as  the  initial  date  for  the  final  period —  -hat  of  open 
world  competition  —  is  entirely  arbitrary.  What  really 
happened  was  that  at  various  times,  from  1865  to  1878, 
a  series  of  more  or  less  unrelated  events  occurred,  all  of 
which  in  the  long  run  served  to  diminish  and  finally  over- 
come the  immense  industrial  lead  which  Great  Britain  had 
established  during  the  Napoleonic  wars.  The  more  im- 
portant of  these  events  may  be  mentioned  here,  but  only 
brifly,  since  they  will  be  recurred  to  later  in  discussion  of 
American  and  German  industrial  growth.  In  order  of  time 
we  may  therefore  call  attention  to  the  development,  after 
the  American  Civil  War,  of  the  western  United  States,  the 
opening  of  new  rich  American  ore  supplies,  the  relatively 
permanent  adoption  by  the  United  States  of  a  high  tariff 
policy,  the  acquisition  by  a  United  Germany  of  the  Lor- 
raine ore  fields,  and  the  later  discovery  of  the  basic  Bes- 
semer process  which  made  those  ores  valuable,  and  the  final 
German  decision  to  embark  on  a  policy  of  protection  and  in- 
tense industrialism.  It  would  be  impossible  to  select  any 
special  date,  between  1865  and  1878,  of  the  years  covered 
by  the  events  above  noted,  and  say  that  at  this  special  date 
England  definitely  would  have  to  face  the  future  loss  of  in- 
dustrial leadership;  but  it  was  within  this  range  of  years  that 
the  foundations  were  laid  for  the  competition  which  was 
ultimately  to  have  that  effect.  In  later  chapters  we  will 
see  what  were  the  conditions,  chiefly  as  to  coal  and  ore  sup- 
ply, which  could  overcome  a  lead  so  long  held  and  so  firmly 
founded. 

During  the  fourth  period  the  output  of  British  iron  in- 
creased little  more  than  one  per  cent,  a  year.  In  the  years 
just  before  the  Great  War  the  production  amounted  to 
about  five  hundred  pounds  per  capita  annually,  just  about 
the  same  as  in  1870.     Industrial  growth,  so  far  as  this  great 


i6  COAL,  IRON  AND  WAR 

basal  industry  was  concerned,  had  for  over  forty  years 
failed  to  more  than  barely  keep  pace  with  population. 
Meantime  the  United  States  and  Germany  had  both  shown 
far  more  rapid  growth,  and  in  the  decade  preceding  the 
World  War  Great  Britain  had  fallen  back  to  third  in  rank 
among  the  iron,  steel  and  coal  producing  countries  of  the 
world. 


CHAPTER  II 

THE  DEVELOPMENT  OF  AMERICA 

Having  outlined  the  course  which  industrial  development 
followed  in  Great  Britain,  we  may  now  turn  to  consideration 
of  the  effects  shown  in  the  United  States  during  the  same 
periods.  It  will  be  found  that  though  the  two  countries 
started  from  almost  equally  low  industrial  levels  in  1750, 
and  though  they  were  again  on  equal  terms  as  competitors 
in  the  advanced  industrialism  of  1900,  there  were  many 
periods  during  the  intervening  century  and  a  half  in  which 
the  course  of  affairs  followed  in  America  was  widely  differ- 
ent from  that  of  Great  Britain.  In  discussing  this  history 
we  can  again  pay  chief  attention  to  the  growth  of  the  coal 
and  iron  industries,  as  offering  the  best  guidance  through  a 
maze  of  otherwise  overwhelming  statistics. 

The  Colonial  iron  trade,  16 19-1783.  In  most  of  the 
colonies  which  later  formed  the  United  States  of  America, 
iron  making  was  taken  up  as  one  of  the  earliest  of  manu- 
facturing activities,  preceded  in  most  instances  only  by  the 
making  of  brick  and  tile.  In  Virginia  furnace  operations 
started  at  least  as  early  as  16 19,  and  by  the  middle  of  the 
seventeenth  century  Massachusetts,  Rhode  Island  and  Con- 
necticut had  also  commenced  production.  These  early 
plants  were  small  blast-furnaces  or  smaller  bloomaries,  run 
of  course  on  charcoal  as  fuel,  and  fed  with  bog  iron  ore  ex- 
cept in  Virginia,  where  another  type  of  ore  was  readily  ob- 
tainable near  the  settlements.  Though  they  served  useful 
purposes  in  the  economy  of  the  early  settlements,  the  condi- 
tions as  to  ore  supply  did  not  promise  any  great  expansion, 
and  as  a  matter  of  fact  none  of  these  very  early  iron  enter- 
prises has  left  a  successor  in  the  same  locality. 

17 


i8  COAL,  IRON  AND  WAR 

In  the  first  quarter  of  the  eighteenth  century,  however,  a 
more  promising  series  of  developments  took  place.  In 
Pennsylvania,  In  New  York  and  In  New  Jersey  Iron  mining 
and  iron  making  was  now  taken  up  In  localities  back  from 
the  coast,  and  many  of  the  localities  then  opened  are  still 
ore  and  metal  producers.  These  newer  plants,  still  run 
on  charcoal  as  fuel,  utilized  the  brown  Iron  ores  associated 
with  limestone  In  the  KIttatlnny  and  Lehigh  valleys  of  New 
Jersey  and  Pennsylvania,  and  the  magnetic  iron  ores  which 
occur  So  abundantly  In  the  northern  part  of  New  Jersey  and 
in  the  Hudson  Highlands.  Maryland,  too,  began  opera- 
tions on  a  new  type  of  ore,  which  promised  greater  per- 
manency of  supply  than  had  the  bog  ores. 

It  Is  questionable  if  In  1700  the  entire  Iron  output  of  all 
the  colonies  amounted  to  over  one  or  two  thousand  tons  an- 
nually, and  this  was  entirely  employed  at  home.  With  the 
developments  in  the  Middle  States,  however,  this  tonnage 
increased  rapidly,  and  by  1730  It  was  sufficient  to  cause 
anxiety  to  British  iron  producers.  From  this  time  on  we 
encounter  more  frequently  English  petitions  for  protection 
against  colonial  Iron  Imports,  and  for  restrictions  on  colonial 
manufacture  and  trade.  American  Iron  exports  to  Great 
Britain  beginning  early  in  the  eighteenth  century  had  act- 
ually increased  by  1741  to  some  thirty-five  hundred  tons 
per  year.  This  Is  of  course  a  ridiculously  small  amount, 
judged  by  our  present  day  standards,  but  It  miist  be  remem- 
bered that  It  was  about  a  fifth  of  the  total  British  output 
of  that  day.  Its  commercial  Importance  can  be  realized 
better  If  we  consider  that  Its  equivalent  to-day  would  be 
the  annual  shipment  of  three  to  four  million  tons  of  Ameri- 
can iron  and  steel  into  England. 

By  the  middle  of  the  century,  steering  a  middle  course  be- 
tween the  home  producer  and  the  home  consumer,  the  Brit- 
ish government  had  arrived  at  a  fairly  definite  policy  with 
regard  to  colonial  manufactures.  The  colonies  were  to  be 
encouraged  to  produce  and  ship  to  England  such  raw  or 


THE  DEVELOPMENT  OF  AMERICA  19 

semi-finished  materials  as  could  be  raised  or  made  more 
cheaply  in  America  than  elsewhere;  but  finished  manufac- 
tures were  to  be  discouraged  or  prohibited,  as  tending  to 
spoil  a  market  which  had  been  carefully  reserved  for  the 
British  manufacturer.  As  applied  to  the  iron  industry,  this 
policy  permitted  the  manufacture  in  the  colonies,  and  the 
shipment  to  England,  of  pig  iron  and  bar  iron;  for  the  Eng- 
lish domestic  supply  was,  as  we  have  already  seen,  falling 
off  at  this  date.  Since  her  requirements  had  to  be  met  by 
importation  anyway,  it  was  better  to  import  crude  iron 
from  her  own  colonies  than  to  increase  her  dependence  on 
Sweden  and  Russia  for  this  important  commodity.  On  the 
other  hand,  the  fabrication  of  bar  iron  into  finished  pro- 
ducts, and  the  manufacture  or  fabrication  of  steel,  were  to 
be  discouraged  or  prohibited  in  the  colonies. 

Regarding  the  effects  of  this  colonial  policy,  we  have  very 
exact  and  ample  data  concerning  one  phase,  and  but  little 
save  surmise  concerning  the  other.  The  prohibitions  and 
regulations  against  the  manufacture  of  finished  products  cer- 
tainly did  not  kill  such  manufactures  as  had  started,  but  they 
were  probably  successful  in  preventing  any  further  growth 
along  these  lines.  The  encouragement  given  to  the  colonial 
shipments  of  pig  iron  and  bar  iron  was,  on  the  other  hand, 
very  effective;  and  its  effects  are  clearly  shown  in  the  an- 
nual customs  house  returns.  The  exports  of  crude  iron 
from  the  American  colonies  to  England  amounted  in  the 
years  immediately  preceding  the  Revolution  to  almost  nine 
thousand  tons.  This  was  perhaps  a  third  as  much  as  Great 
Britain  was  producing  at  that  time. 

When  we  examine  the  geographical  sources  of  these  ex- 
ports, certain  facts  of  interest  appear,  for  the  chief  ex- 
portations  came  from  rather  unexpected  sources.  It  is,  of 
course,  not  a  matter  for  surprise  that  the  Carolinas  figure 
to  only  a  trifling  extent  in  the  export  figures,  but  the  small 
tonnage  sent  out  from  New  England,  New  York  and  New 
Jersey    could    hardly    have    been    expected.     Pennsylvania 


20  COAL,  IRON  AND  WAR 

makes  a  somewhat  better  showing,  reaching  almost  a  thou- 
sand tons  of  pig  and  bar  iron  together  by  1755  ;  but  through- 
out the  whole  period  the  main  exports  went  from  Mary- 
land and  Virginia.  The  two  colonies  together  always  ac- 
counted for  well  over  half  of  the  total  exports,  and  for  most 
years  their  proportion  stood  at  two-thirds  or  more  of  the 
total. 

For  all  of  this  colonial  period  we  have  no  complete  data 
on  the  total  amount  of  iron  produced  in  American  furnaces 
and  forges.  But,  taking  the  exports  into  consideration, 
along  with  fragmentary  data  as  to  the  iron  output  or  iron- 
making  capacity  of  different  colonies  in  different  years,  we 
must  rate  it  at  a  rather  high  figure,  as  iron  production  went 
in  those  days.  It  seems  indeed  probable  that  during  the 
middle  of  the  eighteenth  century  the  American  colonies 
were  making  almost  if  not  quite  as  much  pig  iron,  bars  and 
blooms  as  Great  Britain.  Perhaps  we  should  be  safely 
within  limits  if  we  assume  that  from  1740  to  1775  the  total 
iron  production  of  the  colonies  ranged  from  15,000  to  25,- 
000  tons  annually.  This  might  be  from  a  fifth  to  a  third 
of  the  world's  total  output  during  the  same  decades.  It 
would  be  almost  a  century  before  the  United  States  would 
regain  the  same  relative  importance  as  an  iron  producer 
that  was  held  by  the  colonies  in  1750,  for  at  that  date  the 
English  output  had  fallen  off  owing  to  the  increasing 
scarcity  of  local  charcoal,  and  there  was  no  serious  output 
from  Germany  or  France.  On  a  charcoal  basis,  the  future 
of  the  iron  industry  seemed  to  rest  between  the  American 
colonies  and  the  Baltic  countries. 

During  the  Revolution  the  iron  output  of  the  united 
colonies  must  have  increased  quite  markedly,  for  the  demand 
for  iron  products  was  heavy,  and  most  of  it  had  to  be  sup- 
plied by  colonial  furnaces  and  forges.  Fortunately  none  of 
the  important  iron  producers  were  located  within  the  im- 
mediate field  of  military  operations;  and  the  output  of  crude 
and  finished  iron  and  steel  in  New  York,  northern  New 


THE  DEVELOPMENT  OF  AMERICA  21 

Jersey,  eastern  Pennsylvania  and  eastern  Maryland  was  not 
interfered  with  at  any  time  during  the  struggle.  No  data 
are  available  as  to  annual  output,  but  taking  into  account  the 
general  conditions  it  is  probably  safe  to  assume  that  during 
the  years  1775  to  1783  it  may  have  averaged  some  thirty 
thousand  tons  annually.  For  comparison  we  may  figure  the 
British  output,  during  the  same  years,  as  averaging  certainly 
not  over  forty  thousand  tons. 

In  the  preceding  discussion  of  the  colonial  iron  trade 
there  has  been  an  intentional  suppression  of  detail,  so  that 
attention  could  be  fixed  upon  the  main  features  of  its  de- 
velopment, and  upon  its  relation  to  development  elsewhere 
during  the  same  period.  The  comparisons  induced  by  con- 
sideration of  this  last  phase  of  the  subject  are  strikingly  con- 
tradictory of  certain  very  prevalent  impressions  as  to  the 
relative  industrial  status  of  the  colonies  and  the  new  re- 
public. Our  study  of  the  iron  industry  leads  us  to  the  con- 
clusion that  the  colonies,  during  the  decades  1740  to  1780, 
were  a  far  more  important  factor  in  the  world's  iron  indus- 
try than  was  the  United  States  during  the  first  fifty  or  sixty 
years  of  its  existence.  In  this  one  great  basal  industry,  at 
least,  the  United  States  lost  ground  steadily  as  compared 
with  its  leading  competitor,  for  many  decades.  It  was  not 
until  the  Civil  War  that  it  produced  the  same  percentage  of 
the  world's  iron  output  that  it  had  made  at  the  time  of  the 
Revolution. 

This  apparent  anomaly  is  not  noticed  if  we  limit  our  at- 
tention solely  to  the  United  States,  and  pass  by  what  was 
happening  elsewhere  in  the  world.  Studied  as  a  purely 
local  matter,  the  American  iron  industry  has  shown  a  fairly 
steady  growth  from  small  beginnings  to  first  rank  among 
producers.  But  when  we  take  up  a  study  of  the  growth  of 
the  industry  elsewhere  during  the  same  period,  we  see  that 
there  was  a  long  time  during  which  England  advanced  very 
rapidly  indeed,  while  the  American  growth  was  very  slow. 
So  that  though  at  the  close  of  the  Revolution,  England  and 


22  COAL,  IRON  AND  WAR 

America  had  been  of  almost  equal  Importance  as  pro- 
ducers of  iron,  yet  fifty  years  later  England  was  making 
six  times  as  much  pig  iron  as  the  States.  It  was  not  until 
1890,  over  a  hundred  years  after  the  Revolution,  that  the 
two  countries  again  reached  equality  for  a  moment. 

In  order  to  understand  how  this  curious  cross-current  of 
growth  came  into  operation,  we  must  recall  the  condi- 
tions which  at  the  close  of  our  Revolution  existed  in  indus- 
trial Europe,  and  the  factors  which  were  then  bringing  about 
what  has  been  called  the  Industrial  Revolution.  We  will 
then  see  that  the  independence  of  the  United  States  came 
about  at  a  time  when  industrialism  throughout  Europe  was 
changing  in  structure;  and  that  England,  best  adapted  at 
the  moment  to  these  new  types  of  industrial  activities, 
achieved  an  apparently  commanding  lead,  not  only  in  the 
iron  trade  but  in  all  other  forms  of  machine  industry. 

First  fruits  of  peace.  Ever  since  the  surrender  of  Corn- 
wallis  in  178 1  it  had  been  obvious  that  peace  and  freedom 
were  near  at  hand.  Now,  in  1783,  the  independent  colonies 
were  at  length  able  to  look  about  them,  and  reckon  up  the 
costs  and  the  prospects.  From  either  standpoint  the  view 
was  sufficiently  disheartening. 

There  had,  first  of  all,  been  an  actual  loss  in  population 
during  the  struggle.  This  was  not  due  to  chiefly  deaths  in 
battle  or  by  disease,  but  to  the  emigration  of  a  large  sec- 
tion of  the  loyalists  to  Nova  Scotia  and  New  Brunswick. 
Contemporary  estimates  assumed  that  at  the  close  of  the 
war  the  colonies  contained  some  100,000  less  people  than 
at  its  start. 

Second,  and  more  immediately  disheartening  to  the 
American  manufacturer,  the  peace  had  barely  been  signed 
when  heavy  British  shipments  began  to  reach  the  ports  of 
the  new  nation.  The  development  which  British  manufac- 
turing industry  had  commenced  during  the  last  decade  or  so 
was  now  about  to  show  some  of  the  possibilities  of  the  new 
industrialism.     Within  the  first  ten  years  after  the  close 


THE  DEVELOPMENT  OF  AMERICA  23 

of  the  Revolution,  the  balance  of  trade  had  already  swung 
heavily  against  the  States. 

From  this  table  It  can  be  seen  that,  up  to  about  1745,  the 
balance  of  trade  had  been,  as  a  matter  of  fact,  slightly  in 
favor  of  the  colonies.  Even  the  adverse  balance  from 
that  date  on  to  1783  was  not,  in  reality,  so  unfavorable  a 


British-Am 

ERICAN    iRADE   UALANC 

:e,  1 700-1 790 

^RAGE  FOR  Years 

Exports  to  England 

Imports  from  En( 

1700-1710 

£  265,783 

£  267,205 

1710-1720 

392,654 

365,645 

1720-1730 

578,831 

471,343 

1730-1740 

670,129 

660.137 

1740-1750 

708,943 

812,648 

1750-1760 

802,691 

1,577,420 

1760-1770 

1,044,592 

1,763,410 

1770-1780 

743,561 

1,331,206 

1784-1790 

949,250 

2,491,898 

symptom  as  might  appear,  for  during  those  thirty-eight 
years  there  were  three  wars,  necessitating  heavy  shipments 
of  supplies  to  the  troops  in  America;  and  such  shipments 
probably  accounted  for  most  of  the  excess  imports  during 
the  decades  1750-1780. 

But  with  the  end  of  the  Revolution  it  can  be  seen  that  the 
character  of  the  trade  between  the  confederated  colonies 
and  England  had  changed  very  markedly,  and  that  for  the 
worse,  so  far  as  America  was  concerned.  A  country  with 
little  accumulated  wealth  could  not  long  stand  such  a  drain 
on  her  resources  as  was  indicated  by  the  export  and  import 
figures  during  these  years. 

Finally,  there  was  the  knowledge  that  Britain  possessed 
many  marvelous  new  machines  and  processes,  which  must  be 
introduced  into  American  industry  if  that  was  to  be  placed 
on  a  competitive  basis.  This  led  to  attempts  to  secure  plans 
and  recipes  from  England,  In  defiance  of  British  prohibi- 
tions.    To  which  the  mother  country  responded  by  remark- 


24  COAL,  IRON  AND  WAR 

able  activity  in  the  way  of  preventing  or  remedying  such 
disclosures. 

How  far  these  amiable  practices  were  carried  on  both 
sides  is  well  brought  out  in  the  correspondence  ^  between 
Phineas  Bond,  the  British  consul  at  Philadelphia,  and  the 
Marquis  of  Carmarthen,  then  head  of  the  Foreign  Office. 
Writing  on  November  20,  1787,  Bond  says; 

I  have  the  honor  to  enclose  to  your  Lordship  the  affidavit 
of  two  persons,  natives  of  England,  who  with  great  resolution 
and  no  small  personal  risque  purchased  here  and  reshipped  to 
Liverpool  three  machines  for  spinning  cotton  and  a  machine  for 
carding  cotton  for  spinning.  These  machines  your  Lordship 
will  find  were  clandestinely  shipped  from  Liverpool  to  Phila- 
delphia, packed  in  Queens'  ware  crates  and  casks  to  elude  dis- 
covery. Their  utility  in  the  manufacturing  of  cotton  induced 
these  men  to  endeavor  to  prevent  their  being  established  here, 
which  they  efFectually  accomplished  by  returning  them  to  the 
country  from  whence  they  were  fraudulently  exported. 

Later  in  the  same  letter  Bond  discusses  freely  the  phi- 
losophy which  underlay  these  attempts  to  stifle  the  infant 
manufactures  of  the  new  confederation. 

Endeavors  have  been  and  certainly  will  be  used,  my  Lord, 
to  inveigle  manufacturers  from  Great  Britain  and  Ireland,  and 
tho  (from  the  smallness  of  their  capitals)  the  people  here  may 
not  be  able  suddenly  to  engage  in  extensive  manufactures,  the 
very  wants  of  the  country  will  ere  long  point  to  speculations  of 
that  sort;  and  many  material  articles  may  gradually  advance 
towards  perfection  and  interfere  essentially  with  the  manufac- 
tures of  Great  Britain.  .  .  . 

I  do  not  apprehend,  my  Lord,  that  any  of  the  manufactures 
for  which  premiums  are  offered  will  be  speedily  brought  to  a 
State  of  Rivalry  with  those  of  Great  Britain,  but  when  matters 
of  this  sort  are  in  agitation  it  is  fit  to  guard  against  an  evil, 
which,  though  at  present  in  its  infancy,  may  by  perseverance 
and  management  progressively  arrive  at  such  a  pitch  as  to  in- 
^Ann.  Rep.  Amer.  Hist.  Assoc,  for  1896,  pp.  552-554. 


THE  DEVELOPMENT  OF  AMERICA  25 

terfere  essentially  with  the  interests  of  the  British  manufac- 
turers. 

And  later,  regarding  a  point  of  special  interest; 

In  like  manner,  my  Lord,  the  same  political  event  has  ex- 
tinguished the  Parliamentary  restraint  upon  slitting  mills. 
Many  mills  of  that  description  have  been  erected  within  a  few 
years  to  the  great  profit  of  the  owners.  The  facility  for  ob- 
taining bar  irons  and  the  great  and  immediate  demand  for  the 
larger  sort  of  nails  has  totally  put  an  end  to  the  importation  of 
the  sizes  above  sixpenny,  as  they  are  called;  the  lesser  sort, 
which  requires  more  labor  and  more  art  and  are  not  in  so 
great  demand,  are  still  imported  from  England.  The  naileries 
here  are  not  carried  on  as  extensively  as  they  might  be.  There 
is  a  want  of  hands;  parents  are  averse  to  placing  their  children 
to  this  sort  of  trade,  and  the  most  liberal  offers  of  schooling, 
freedom  dues  and  other  indulgences  have  failed  to  obtain  any- 
thing like  the  numbers  required. 

Before  we  resume  consideration  of  the  quantitative 
growth  of  manufactures  it  may  be  of  interest  to  consider  for 
a  moment  the  character  of  the  infant  iron  industry  of 
America  at  this  date,  so  far  as  its  processes  and  products 
and  markets  were  concerned.  To  do  this  we  must  forget 
everything  we  know  of  the  present  United  States,  and  go 
back  mentally  into  a  world  of  very  different  type  —  differ- 
ent not  only  in  degree  but  even  in  kind. 

At  the  close  of  the  American  Revolution  the  new  world 
had  still  a  very  small  and  closely  limited  use  of  iron  and 
steel  products.  There  were  of  course  no  railways  or  steam- 
boats anywhere,  neither  in  America  nor  in  Europe.  In  the 
colonies,  indeed,  there  were  no  steam  engines  whatever,  of 
any  type  or  use.  There  were  few  machines  of  any  sort 
used  in  any  industry,  and  a  maximum  of  hand  labor.  Such 
textile  and  other  manufacturing  as  was  carried  on  was  done 
on  a  very  small  scale,  and  at  widely  separated  small  shops  or 
plants;  most  of  it,  indeed,  was  done  in  the  home.     Trans- 


26  COAL,  IRON  AND  WAR 

portation,  whether  of  manufactured  products  or  other  com- 
modities, was  effected  by  pack-horses  or  by  wooden  carts 
or  wagons  on  land;  by  wooden  ships  and  barges  on  water. 

Under  these  conditions  we  can  readily  understand  that 
certain  lines  of  iron  and  steel  products  which  we  now  re- 
gard as  fundamental  either  did  not  exist  at  all,  or  were  in 
merely  trifling  demand.  Steel  had  practically  no  structural 
applications;  it  was  used  almost  exclusively  for  cutting  tools 
and  for  instruments.  Wrought  iron  was  used  in  the  form 
of  nails,  spikes  and  bars;  and  in  agricultural  implements. 
Cast  iron,  on  the  other  hand,  was  used  for  many  purposes  to 
which  it  is  really  ill  adapted  —  cannon,  for  example,  were 
often  made  by  direct  casting  from  the  furnace.  Stove  parts, 
cooking  and  other  household  utensils  —  these  accounted  for 
much  of  the  iron  utilized. 

The  bulk  of  the  American  iron  output,  as  marketed  in 
1783  or  later,  was  therefore  cast  iron,  produced  in  small 
charcoal  furnaces,  making  from  a  few  tons  up  to  25  tons 
per  week.  Some  of  this  pig  metal  was  sold  in  that  form; 
much  of  it  was  made  directly  into  castings  from  the  fur- 
nace. Of  the  wrought  iron  used,  a  portion  was  produced 
direct  from  the  ore  in  small  bloomaries;  another  portion 
\/as  reworked  from  the  pig.  A  very  small  tonnage  of  blis- 
ter steel  was  made  during  the  Revolution,  to  fill  the  urgent 
necessities  of  the  case;  after  the  war  its  production  almost 
or  quite  ceased  for  some  time,  though  we  hear  of  it  again 
about  1800. 

For  the  best  summary  of  the  American  industrial  situa- 
tion, during  this  critical  period  in  our  history,  recourse  must 
again  be  had  to  the  renegade  American  who  acted  as  His 
Majesty's  Consul  at  Philadelphia.  Writing  to  Lord  Car- 
marthen on  November  loth,   1789,  Bond  says; 

Manufactures  which  require  art,  labor  and  expense  to  any 
great  extent  of  either,  may  be  attempted  but  they  will  often 
fail  for  want  of  capital  and  because  the  extensive  capitals  in 
Europe  can  afford  their  manufactures  at  a  rate  vastly  lower 


THE  DEVELOPMENT  OF  AMERICA  27 

than  almost  anything  can  be  afforded  for  which  is  undertaken 
here. 

Where  the  raw  material  however  can  be  taken  from  the 
earth  and  converted  into  an  article  of  immediate  use  or  speedy 
demand  with  little  expense  and  art,  and  where  from  the  bulk 
or  weight  of  the  foreign  manufactures  the  expense  which  may 
attend  the  carriage  is  great,  the  American  manufacturers  will 
have  the  advantage  of  the  European  manufacturers,  and  in  this 
line  the  Americans  do  and  will  succeed. 

Under  the  description  of  articles  of  immediate  use  and 
speedy  demand  may  be  comprehended  nails  and  coarse  manu- 
factures of  iron,  tools  which  relate  to  husbandry,  to  architec- 
ture, and  which  are  used  by  most  handycraftsmen.  Under  the 
description  of  articles  of  heavy  bulk  or  weight  may  be  compre- 
hended anvils,  forge  hammers,  anchors  and  cast  irons  of  various 
kinds  for  mills,  carriages,  and  other  purposes. 

This  was  certainly  a  very  clear  and  fair  summary  of  both 
the  actual  situation  and  the  immediate  prospects  of  the 
American  iron  Industry  ;-but  In  a  schedule  accompanying  the 
letter  Bond  furnished  details  as  to  the  extent  of  American 
Industries  at  that  date  In  the  different  states.  The  data 
furnished,  so  far  as  they  relate  to  the  iron  and  steel  works, 
are  as  follows: 

New  England.  Shovels,  nail  rods,  nails,  iron  plates  or  cast- 
ings and  most  of  the  coarser  manufactures  of  iron  are 
made  here. 

New  York.  The  principal  manufactures  at  present  are  nails, 
nail  rods,  bar  iron,  hollow  iron  castings  and  various  other 
iron  castings,  kettles,  pots,  stoves,  chimney  backs,  etc. 

New  Jersey.  There  are  nail  manufactories  at  Burlington 
and  in  other  parts  of  this  State.  One  at  Burlington  has 
20  fireplaces;  but  they  are  by  no  means  fully  employed. 
The  iron  furnaces  and  forges  in  this  state  are  very  profit- 
able. There  are  in  New  Jersey  a  steel  works,  and  a  plat- 
ing forge,  several  furnaces,  bloomaries  and  fineries,  and 
one  air  furnace,  chiefly  employed  in  casting  kettles  to  make 
potash  and  maple  sugar.     The  furnaces  in  New  Jersey 


28  COAL,  IRON  AND  WAR 

generally    manufacture   hollow    iron    castings   and    coarse 
castings  for  the  West  India  market. 
Pennsylvania.     The   manufactures  of   iron   are  carried   on 
with  great  spirit,  there  are  many  furnaces,  forges  and  slit- 
ting   mills    extensively    and    profitably    employed.     Pigs, 
coarse  castings  of  various  sorts,  bar  iron,  nail  rods,  and 
nails  of  sizes  above  sixpenny,  large  flooring  brads,   deck 
and  sheathing  nails,  scythes,  sickles,  shovels,  spades,  tire 
for  carriages  and  wheel  boxes  are  manufactured  in  great 
quantities;  so  that  the  importation  of  large  nails  and  cast 
iron  is  for  the  most  part  at  an  end.     Steel  is  also  made 
here  of  a  better  quality  than  the  common  English  steel  — 
but  not  equal  to  Crawlays;  the  iron  of  America  is  well 
calculated   for  this  species  of  manufacture  which   might 
and  probably  will  be  very  profitably  attended  —  at  present 
the  importation  from  Europe  is  reduced  about  one  quarter. 
Southern  States.     The  iron  of  Maryland  is  of  a  very  good 
quality;  they  export  vast  quantities  of  it  in  pigs,  but  the 
quantity  of  bar  iron  exported  is  but  small  in  proportion, 
most  of  the  forges  being  at  a  great  distance  from  navigable 
waters.     The  coarser  kinds  of  castings  are  also  made  at 
the  different  furnaces. 

Four  decades  of  uncertainty;  1783-1823.  For  the  four 
decades  to  come,  after  the  peace  with  Britain,  the  progress 
of  the  new  nation  was  not  the  steady  triumphal  march  so 
often  depicted,  but  a  very  Irregular  growth,  marked  In  some 
industries  at  least  by  alternating  periods  of  hope  and  equal 
or  longer  periods  of  depression.  This  Is  well  shown  by  the 
industry  which  we  have  selected  as  a  basis  for  discussion. 
For,  when  all  the  available  data  are  gathered,  we  get  a  very 
remarkable  and  unexpected  picture  of  what  actually  hap- 
pened in  this  basal  manufacture  during  the  four  decades  in 
question. 

We  find  that,  popular  impression  to  the  contrary  notwith- 
standing, we  actually  lost  ground  In  this  great  industry,  so 
that  less  pig  iron  was  being  annually  made  in  the  United 
States  forty  years  after  the  Revolution  than  had  been  made 


THE  DEVELOPMENT  OF  AMERICA  29 

in  the  colonies  before  independence  had  been  accomplished. 
There  had  been  growth  in  many  other  directions,  it  is  true, 
but  there  had  been  lost  ground  in  this.  And  when  com- 
parison is  made  on  a  relative  basis,  the  results  are  still  more 
discouraging,  for  though  in  1770  or  1780  Great  Britain 
and  the  colonies  had  been  almost  on  a  parity,  so  far  as  an- 
nual output  of  pig  iron  was  concerned,  in  1820  Great  Bri- 
tain was  producing  almost  half  a  million  tons  a  year,  as  com- 
pared with  some  20,000  tons  In  the  United  States.  The 
former  equality  had  changed  to  a  ratio  of  25  to  i  against  the 
new  nation. 

The  actual  course  of  industrial  events,  during  this  forty 
year  period,  may  be  briefly  summarized.  Immediately  after 
the  peace  with  England,  the  feeble  American  industries 
were  crushed  down  under  the  weight  of  British  Imports. 
The  rather  mildly  protective  measures  adopted  In  1792  gave 
them,  however,  an  opportunity  for  renewed  growth,  which 
was  increased  in  some  Industries  by  the  later  commercial 
treaties.  A  commercial  depression  about  1798  forced  out- 
put down  for  a  year  or  two,  when  growth  was  resumed. 
The  embargo,  silliest  of  political  expedients,  wrecked 
foreign  trade  but  to  some  extent  encouraged  the  more  neces- 
sary of  the  domestic  manufactures,  and  some  lines  were 
very  rapidly  developed  under  the  stimulus  of  the  embargo, 
the  later  period  of  non-Intercourse,  and  the  final  war  with 
Britain.  This  was  so  much  the  case  that,  for  one  example, 
the  Iron  made  In  18 14  was  estimated  currently  at  between 
65,000  and  85,000  tons,  or  some  eight  times  as  much  as 
In  the  depression  following  the  Revolution.  But  this  favor- 
able state  of  things  could  not  last.  The  closing  of  the 
European  wars  brought  another  deluge  of  English  products 
on  a  really  very  limited  American  market,  and  a  sharp  down- 
ward trend  of  domestic  output  Immediately  followed.  The 
unloading  of  overstocked  British  mills  was  followed,  with 
hardly  an  Interval  to  regain  courage,  by  a  serious  commer- 
cial depression  In  18 19;  and  the  American  iron  output  In 


30  COAL,  IRON  AND  WAR 

consequence  of  these  factors  pitched  steadily  downward 
from  its  high  in  1815  to  a  very  low  point  indeed  in  1820 
and  the  year  or  so  immediately  following.  Then,  however, 
began  a  rise  which  this  time  was  to  endure,  and  that  will 
be  discussed  later. 

The  illusion  that  has  thus  been  dispelled  —  that  of 
phenomenally  rapid  and  sustained  growth  from  indepen- 
dence onward  —  is  one  of  merely  local  interest.  But  along 
with  It  we  must  note  the  passing  of  another  widely  held 
belief  —  that  the  so-called  industrial  revolution  took  place 
about  the  same  time  in  all  countries  and  in  all  industries. 
We  have  already  seen  that  this  great  change  was  accom- 
plished in  England  during  the  Napoleonic  wars.  But  in  the 
United  States  and,  as  we  will  see  later,  In  Germany  and 
France,  there  was  little  trace  of  it  during  the  period  in  ques- 
tion. It  did  not  affect  American  Industry  in  any  marked 
degree  until  after  1823. 

During  the  four  decades  whose  history  has  just  been  dis- 
cussed, there  had  been  little  If  any  advance  made  in  the 
technology  of  the  American  Iron  industry.  Fuel,  furnace 
operation,  product  and  methods  of  after-treatment  were  all 
much  the  same  in  1823  as  they  had  been  in  1783. 

All  the  American  iron  made  was  charcoal  iron,  for  no 
serious  attempts  had  as  yet  been  made  to  substitute  coke  or 
anthracite  as  a  fuel.  Perhaps  four-fifths  of  the  total  prod- 
uct was  pig  metal  from  blast  furnaces,  the  remainder  being 
iron  made  direct  from  the  ore  in  bloomarles.  Puddling 
and  rolling  had  been  introduced  In  18 17,  but  as  yet  neither 
process  had  been  widely  adopted,  and  the  typical  American 
product  was  therefore  a  hammered  bar,  as  distinct  from  the 
puddled  and  rolled  iron  so  extensively  Imported  from 
Europe.  Finally,  such  steel  as  was  made  was  still  blister  or 
cementation  steel,  the  crucible  process  not  being  introduced 
until  later,  a  century  after  Its  adoption  In  England. 

In  considering  the  Industrial  history  of  this  period  it  Is 
well  to  bear  these  technical  conditions  In  mind,  for  they  not 


THE  DEVELOPMENT  OF  AMERICA  31 

only  serve  to  explain  the  slow  development  of  American 
production,  but  they  throw  some  light  on  the  tariff  con- 
troversies of  the  time.  It  was  true  for  example  that  ham- 
mered charcoal  iron  could  be  made  in  the  States  about  as 
cheaply  as  anywhere  in  the  world,  but  for  most  uses  it 
could  not  compete  with  puddled  and  rolled  coke  iron. 

The  Industrial  Revolution  in  America,  1823-1857.  The 
three  decades  whose  industrial  history  in  the  United  States 
is  now  to  be  considered,  saw  the  same  Industrial  Revolution 
in  America  that  had  been  the  notable  feature  of  English 
history  forty  years  previously.  There  was  the  same  growth, 
at  almost  the  same  rate,  from  a  commencement  in  sheer 
depression.  At  the  close  of  the  period  most  American 
industries  were  firmly  established  on  a  large-scale  basis, 
organized  along  essentially  modern  lines. 

The  period  commences  with  the  world  just  emerging 
from  almost  a  decade  of  profound  industrial  and  com- 
mercial depression,  which  had  succeeded  the  twenty-five 
years  of  world  wars  in  Europe  and  elsewhere.  The  war 
period  had  been  characterized  by  vast  expenses  and  wild 
currency  inflation  everywhere,  by  the  great  expansion  in  out- 
put of  English  mills  and  factories,  and  by  a  forced  and 
unsound  growth  of  local  manufacturing  industries  in  the 
countries  which  were  temporarily  debarred  from  securing 
British  goods.  The  collapse  after  the  peace  was  wide- 
spread, and  even  the  steadily  increasing  Russian  gold  out- 
put, which  was  very  large  for  that  period,  did  not  avail  to 
stay  the  decline.  The  American  iron  output,  as  has  been 
seen,  was  in  1820  only  a  quarter  of  what  it  had  been  in 
1 8 14,  and  less  than  it  had  been  in  1775  or  1783.  In  this 
great  industry  at  least,  the  new  republic  had  not  maintained 
its  standing  of  fifty  years  before. 

As  in  the  case  of  the  English  iron  industry  of  1740,  this 
period  of  depression  and  declining  output  was  to  be  followed 
by  a  growth  equally  remarkable  and  long  sustained.  For 
in  1823  the  United  States  was  on  the  verge  of  a  growth 


32 


COAL,  IRON  AND  WAR 


in  the  iron  industries  which  would,  in  three  decades  or  so, 
increase  their  annual  output  forty  times  over  the  production 
of  1820.  The  Industrial  Revolution  had  at  last  reached 
America,  forty  years  after  it  had  given  British  industrial- 
ism its  new  life. 

The  rapidity  and  extent  of  this  growth  in  iron  output, 
during  the  period  whose  industrial  history  we  are  about 
to  consider,  can  be  best  appreciated  when  the  facts  are 
presented  in  graphic  form,  as  in  Figure  2  herewith. 

In  order  to  better  understand  what  this  growth  meant, 
relative  to  the  world  at  large,  it  will  be  interesting  to  draw 


1.000.000 


900.000 


800,000 


700.000 


g 

"5    600.000 

o 


C    500.000 

o 

a 
< 

'^   400.000 


300.000 


200.000 


100.000 


~ 

" 

"■" 

~ 

_ 

*, 

V 

1 
1 

1 

1 

1 

1 

1 

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1 

1 

1 

L 

1 

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^^ 

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f 

f 

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Fig.  2.    American  iron  production,  1 820-1 860 


THE  DEVELOPMENT  OF  AMERICA  33 

some  comparisons.  In  1820,  for  example,  we  can  assunie 
that  the  pig-lron  production  of  the  entire  world  did  not 
amount  to  over  900  thousand  tons.  Of  this  400  thousand 
was  made  by  Great  Britain.  France,  Russia,  Germany  and 
Sweden  followed  in  the  order  named,  but  very  far  below 
Great  Britain,  their  outputs  ranging  from  120  down  to  50 
thousand  tons  a  year.  Below  them,  again,  came  in  turn 
Belgium,  Austria  —  and  finally  the  United  States.  At  that 
date  the  United  States  was  not  better  than  eighth  in  rank 
as  an  iron  producer,  her  output  was  one-twentieth  that  of 
Great  Britain,  and  around  one-fifth  that  of  either  France, 
Russia  or  Germany.  And  —  this  is  the  point  of  chief  inter- 
est—  in  1820  it  was  by  no  means  so  obvious  as  in  1920 
that  this  low  rank  was  merely  temporary.  An  observer 
might  have  concluded,  reasonably  enough,  that  the  United 
States  would  continue  to  develop  rapidly  as  an  agricultural 
nation,  and  would  continue  to  draw  the  bulk  of  its  manu- 
factured goods  from  Europe. 

One  reason  for  this  state  of  things  is  not  far  to  seek. 
It  was  this  —  that  of  the  ten  millions  who  inhabited  the 
United  States  in  1820,  there  was  probably  not  one  person  in 
a  thousand  who  had  ever  actually  seen  a  piece  of  American 
coal,  and  perhaps  not  as  much  as  one  in  ten  thousand  was 
mad  enough  to  dream  that  it  would  ever  be  of  any  service, 
except  as  a  convenience  to  the  housewife  or  —  as  a  very 
wild  suggestion  —  to  the  blacksmith.  It  is  hard  to  realize 
this  condition  now,  when  we  have  come  to  accept  the  manu- 
facturing use  of  American  coal  as  a  matter  of  course.  Let 
us  recall  merely  that  all  the  records  available  seem  to  in- 
dicate a  movement  of  only  a  few  thousand  tons  a  year  from 
the  anthracite  regions,  chiefly  to  Philadelphia,  and  almost 
entirely  for  use  as  household  fuel.  As  for  bituminous  coal, 
only  the  mines  of  the  Richmond  district  in  Virginia  had  been 
opened,  and  they  shipped  perhaps  forty  thousand  tons  a 
year.  To-day,  a  total  coal  output  of  over  five  hundred 
million  tons  furnishes  a  sharp  contrast.     In  1820,  however, 


34  COAL,  IRON  AND  WAR 

American  coal  simply  did  not  exist,  as  a  serious  commercij 
product,  though  it  too  was  on  the  verge  of  taking  part  i 
progress.  By  the  end  of  the  period  we  are  now  discussin 
—  1857  —  the  output  of  American  coal  had  risen  froi 
the  few  thousands  above  noted  to  around  twelve  millior 
of  tons. 

Recurring  to  the  diagram  just  presented,  attention  nee 
hardly  be  called  to  one  of  the  very  striking  features  in  coi 
nection  with  American  industrial  growth,  for  it  is  show 
very  clearly  in  the  figure.  The  feature  in  question  is  il 
remarkable  irregularity  of  rate,  as  compared  with  simila 
growth  in  other  industrial  countries  —  Great  Britain  c 
Germany  for  example.  When  we  consider  the  movemer 
only  by  decades  or  by  longer  periods,  the  noteworthy  matte 
is  the  total  extent  of  the  progress.  But  when  it  is  studie 
in  more  detail,  the  outstanding  facts  are  its  tremendou 
rises,  and  its  no  less  remarkable  declines.  The  America 
iron  industry  had  already,  at  this  early  date,  assumed  it 
characteristic  feature,  that  of  being  "  either  prince  o 
pauper,"  and  many  other  American  industries  have  share 
its  fortunes  in  this  regard.  Comparison,  over  the  sam 
periods,  with  the  growth  in  British  or  German  output  i 
very  interesting,  and  indicates  that  we  are  dealing  largel 
with  a  local  and  national,  not  a  world-wide,  phenomenor 

This  irregularity  in  American  development  is  not  charge 
able  to  technical  factors,  for  as  regards  raw  materials  w 
have  managed  to  find  new  or  enlarged  supplies  about  a 
they  were  necessary.  Neither  is  it  due  to  periodic  losse 
in  population,  or  to  sudden  losses  of  territory  —  as  in  th 
France  of  1870.  There  are,  it  seems,  two  factors  at  worl 
here,  both  of  human  origin,  which  are  more  active  in  th 
United  States  than  in  its  European  competitors.  One  i 
the  wild  expansion,  and  equally  sharp  depression,  which  i 
a  characteristic  feature  of  a  new  country  whose  develop 
ment  proceeds  more  rapidly  than  its  available  supply  o 
capital.     The  other  is  the  unsteadiness  of  our  fiscal  policy 


THE  DEVELOPxMENT  OF  AMERICA  35 

for  whatever  we  may  think  as  to  the  advisability  or  error 
of  either  free  trade  or  protection,  no  one  can  deny  that  the 
United  States  Is  the  only  civilized  nation  which  has  been 
subjected  to  such  rapid,  sharp  and  frequent  alternations  of 
policy  in  these  regards.  The  period  which  we  have  now 
under  imniediate  consideration,  1 820-1 857,  throws  a  good 
deal  of  light  upon  both  of  these  factors,  for  It  includes 
several  great*  financial  crises,  and  several  violent  changes 
in  tariff  policy. 

We  are  aj)t  to  speak  casually  of  the  tariff  of  the  United 
States,  without  stopping  to  think  that  a  tariff  policy  Is  the 
one  thing  we  never  have  had.  Since  the  first  discussion  in 
1789,  we  have  been  deluged  with  argument  on  both  sides 
of  the  question,  for  whenever  a  political  party  is  utterly 
at  a  loss  for  a  platform,  it  immediately  takes  up  the  question 
of  changing  the  tariff.  In  one  direction  or  the  other.  Con- 
gressional and  cart-tail  oratory  have  never  been  lacking, 
while  the  books,  pamphlets,  reports  and  briefs  on  tariff 
questions  have  been  one  of  the  main  causes  for  the  vast 
growth  In  the  American  paper  industry.  Under  these  cir- 
cumstances it  will  be  realized  that.  In  discussing  tariffs  In 
this  volume,  we  are  treading  on  very  dangerous  ground; 
and  If  to  that  we  add  a  discussion  of  currency  questions, 
the  chance  of  getting  through  safely  Is  very  small  Indeed. 
Nevertheless  the  two  matters  must  be  referred  to,  since 
both  are  notable  features  of  the  period  under  review.  We 
are  not,  however.  Interested  in  theoretical  arguments  on 
either  subject,  but  merely  desirous  of  getting  some  facts  Into 
the  record,  a  practice  quite  foreign  to  political  discussions 
on  such  matters. 

The  period  which  we  are  discussing  commenced  during  the 
great  trade  depression  following  the  Napoleonic  wars,  a 
depression  which  was  world-wide  In  Its  effects.  The  finan- 
cial crisis  of  1 8 19,  felt  in  every  country,  had  remedied  the 
worst  of  the  Inflation,  both  In  currency  and  In  business, 
which   had   grown   up   during   those   twenty-five   years   of 


36  COAL,  IRON  AND  WAR 

almost  constant  warfare.  The  revival  of  activity,  after 
this  severe  crisis,  was  not  immediate,  and  did  not  proceed 
at  the  same  rate  in  all  industries  and  in  all  countries.  This 
revival,  which  can  be  noted  about  1820  to  1825  in  almost 
every  country,  seems  to  have  had  several  broad  and  general 
causes.  There  was  for  example  the  growth  of  the  American 
population  and  its  steady  extension  westward,  with  concur- 
rent increases  in  the  agricultural  and  commercial  importance 
of  the  western  regions;  there  was  also  development,  com- 
mercially at  least,  in  the  South  and  central  American  colonies 
as  they  won  their  freedom  from  Spanish  rule;  there  was: 
a  steady  and  important  increase  in  gold  output,  due  to  dis- 
coveries in  Russia  and  Siberia,  which  aided  in  reestablishing 
sounder  finances  in  the  nations  of  Europe.  During  the 
wars,  also,  England  had  developed  the  new  machine-indus- 
trialism, and  that  was  now  spreading  quite  rapidly  to  the 
Continent  and  to  America.  Commodities  could  be  pro- 
duced in  quantity  under  the  new  system;  new  markets,  as 
has  been  noted,  were  opening  for  such  commodities;  and 
now  the  means  of  reaching  these  markets  were  in  process 
of  great  improvement.  In  1807  the  first  commercial  steam- 
ship had  been  operated  on  the  Hudson;  in  18 16  the  EngUsh 
Channel  was  crossed  under  steam;  and  in  18 19  the  Atlantic. 
Railways,  operated  under  steam,  were  to  appear  shortly, 
the  first  English  line  commencing  operation  in  1825. 

Under  these  stimuli  —  new  markets,  new  and  cheaper 
ways  of  reaching  them,  new  and  cheaper  products, —  trade 
and  industry  were  forced  into  rapid  growth.  In  the  United 
States  these  general  causes  were  aided  by  the  operation  of 
tariffs,  which  certainly  accentuated  and  specialized  the 
growth  of  American  industry,  though  just  as  certainly  they 
were  not  the  principal  cause  of  that  growth. 

The  iron  industry,  as  we  have  seen,  had  languished  until 
the  middle  twenties,  and  it  is  difficult  to  credit  all  its  growth 
after  that  date  to  the  tariffs  of  1824  and  1828,  and  still 
to  admit  that  those  of  18 16  and  1818  had  been  of  no  avail 


THE  DEVELOPMENT  OF  AMERICA  37 

whatever.  But  when  a  protective  tariff  happened  to  coin- 
cide with  an  outburst  of  world-wide  industrial  activity,  the 
cumulative  effect  was  of  course  tremendous,  and  we  have 
in  consequences  a  really  remarkable  growth  In  American 
iron  output  In  the  years  from  1823  onward. 

But  a  policy  which  had  endured  from  18 16  to  1828  was 
of  course  too  good  to  last,  so  in  1832  there  was  the  begin- 
ning of  tariff  reductions  which  reached  their  point  of  lowest 
duties  about  1842.  The  action  of  the  Iron  industry  under 
these  various  changes  is  interesting,  and  might  be  instruc- 
tive. From  the  20  thousand  tons  of  annual  output  in  1820, 
it  rose  to  well  over  300  thousand  a  year  in  the  period 
1836-7-8.  Then,  but  not  till  then,  it  began  a  fall  which 
left  It  with  not  much  over  200  thousand  tons  a  year  in  1845. 
But  as  to  the  reason  for  this  fall,  we  have  to  seek  farther 
afield  than  a  tariff  act. 

From  about  1820  onward  the  world  had  increased  in- 
dustrial activity  at  a  very  high  rate,  and  the  beginning  of 
railroad  development  aided  in  this  activity.  But  it  also 
aided  in  bringing  about  its  end,  for  the  fixation  of  capital 
in  enterprises  which  were  not  immediately  productive, 
though  of  course  of  great  future  value,  led  to  the  collapse. 
As  usual  during  great  trade  booms,  speculation  had  been 
rampant  In  ev^ery  line,  and  In  the  United  States  it  had  been 
specially  dangerous  In  the  form  of  a  western  land  boom. 
This,  as  also  is  usual,  had  reached  its  maximum  immediately 
before  the  collapse  of  the  whole  structure.  The  additional 
fact  that  the  banking  system  then  in  vogue  was  hopelessly 
unsound  made  the  immediate  effects  more  severe  In  America 
than  in  Europe. 

Rallying  slowly  from  the  effects  of  the  crisis  of  1837,  the 
world  took  on  a  renewed  activity  about  1842  or  a  little 
later.  In  the  American  Iron  Industry  the  effects  were  first 
shown  in  1843-44,  and  the  growth  then  begun  carried  the 
output  from  a  low  of  about  230,000,  tons  a  year  up  to 
800,000  tons  in  1848.     This  rise  was  of  short  duration,  for 


38  COAL,  IRON  AND  WAR 

a  drop  of  500  thousand  tons  occurred  in  1852.  Another 
rally,  carrying  American  iron  output  in  1856  to  the  old 
annual  record  of  1848,  was  cut  short  again  by  the  panic  of 
1857.  Economists  generally  ascribe  the  leading  part  in 
this  world-wide  activity  of  the  1845-185 5  decades  to  the 
influence  exerted  by  the  gold  discoveries  in  California  and 
Australia,  but  careful  examination  of  our  own  iron  produc- 
tion figures,  and  of  the  diagram  of  average  prices,  later 
presented  (page  231),  seems  to  throw  more  than  a  little 
doubt  on  the  accuracy  of  this  conclusion.  The  industrial 
activity  commenced  before  gold  was  discovered,  it  reached 
its  apex  about  the  time  of  the  discoveries,  it  ended  in  the 
usual  speculative  collapse  in  spite  of  the  increased  gold  out- 
put. The  subject  is  of  great  importance  and  will  be  later 
recurred  to  (Chapter  XII).  As  to  the  effects  of  the  tariffs 
of  1842,  1846  and  1857,  which  happened  to  coincide  with 
years  of  change  in  the  direction  of  world  activity,  they  seem 
to  have  accentuated  the  effects  of  these  general  changes. 
Their  direct  influence,  however,  was  perhaps  less  than  that 
of  the  internal  changes  which  had  been  produced  in  American 
industry  along  the  line  of  improvements  in  practice  and  in 
product;  and  to  these  changes  some  consideration  is  now 
due. 

The  industrial  revolution  which  came  to  pass  in  the 
United  States,  like  Its  earlier  predecessor  in  England,  not 
only  brought  about  increased  output  of  commodities,  but 
it  was  marked  by  technical  progress  and  by  the  development 
of  great  manufacturing  centers.  The  growth  of  output 
has  already  been  referred  to  and  illustrated,  but  the  two 
other  marked  features  of  the  new  industrialism  may  be 
briefly  discussed. 

As  to  technical  progress  during  the  period  1 823-1 857, 
the  American  iron  industry  at  last  adopted  several  of  the 
great  Improvements  which  had  been  taken  up  at  earlier  dates 
in  the  English  trade.  The  delay  in  the  adoption  is  very 
marked,  and  casts  some  doubts  on  the  quick  adaptability 


THE  DEVELOPMENT  OF  AMERICA  39 

which  we  are  accustomed  to  attribute  to  the  American  tem- 
perament. It  is  the  more  curious,  because  it  will  be  seen 
that  some  of  the  changes,  at  least,  could  have  been  profit- 
ably made  long  earlier.  The  following  tabular  statement 
summarizes  some  of  the  more  important  changes,  made 
either  in  the  iron  industry  itself  or  in  the  later  treatment 
of  its  product  during  the  period  now  under  review. 

England  America 

Coke  first  used  as  furnace  fuel 1735  1837 

Coke   generally   adopted 1780  1865 

Puddling   process   introduced.-. 1783  1817 

Rolls   used    1783  1817 

Hot    blast    adopted 1828  1834 

Crucible   steel   made 1740  1832 

Of  the  changes  noted,  the  two  which  had  the  broadest 
industrial  importance  were  the  substitution  of  coke  for  char- 
coal as  a  furnace  fuel,  and  the  use  of  a  heated  instead  of  a 
cold  blast  in  the  furnace.  The  first  made  possible  a  great 
increase  in  iron  output  by  coal-producing  countries,  as  com- 
pared with  the  limited  and  ultimately  declining  output  which 
must  be  expected  from  a  region  where  charcoal  is  the  fuel 
used.  It  also  made  sharp  changes  in  the  localization  of  the 
American  iron  industries,  from  the  seaboard  and  Allegheny 
regions,  where  the  furnaces  were  mostly  located  during  the 
charcoal  (and  the  intermediate  anthracite)  period,  to  the 
regions  west  of  the  mountains,  in  the  great  bituminous  coal 
fields  of  Pennsylvania,  Ohio  and  West  Virginia.  The  second 
technical  change,  the  heating  of  the  furnace  blast,  made  a 
very  sharp  cut  in  manufacturing  costs  at  any  given  works, 
reducing  the  cost  per  ton  of  pig-metal  at  least  25  per  cent, 
and  often  more.  This  was  one  of  the  most  suddenly  made 
economies  in  the  history  of  the  industry,  its  closest  rival 
m  this  regard  being  the  later  invention  of  the  Bessemer 
process  for  making  steel,  which  likewise  caused  a  very  great 
reduction  in  cost  of  product  per  ton. 


40  COAL,  IRON  AND  WAR 

The  remaining  phase  of  the  matter  —  the  development 
by  the  new  Industrialism  of  great  manufacturing  centers, 
need  hardly  be  discussed  at  length,  for  Its  effects  along  this 
line  are  very  generally  understood.  In  connection  with  our 
special  subject  it  need  only  be  pointed  out  that  the  impor- 
tance of  western  Pennsylvania  as  a  manufacturing  region 
dates  from  about  this  period.  The  broadening  of  the  de- 
mand for  bituminous  coal  and  coke  gave  to  Pittsburgh  an  ad- 
ditional and  greater  reason  for  existence,  aside  from  Its  ad- 
vantages for  reaching  the  Mississippi  and  Interior  markets 
which  had  first  attracted  Industries  to  the  river  junction. 

War,  inflation  and  collapse;  1857-1873.  During  the 
period  whose  Industrial  history  has  just  been  discussed,  the 
United  States  had  been  particularly  fortunate  as  regards 
serious  wars.  The  war  with  Mexico  had  been  on  a  small 
scale  and  had  no  perceptible  Influence,  of  Itself,  on  American 
industry;  though  at  its  close  we  acquired  a  vast  Pacific  coast 
territory  which  later  did  have  very  Important  effects  by  aid- 
ing finances  and  Inciting  railroad  development.  In  the 
period  which  we  are  now  to  consider,  the  conditions  were 
in  this  respect  very  different,  for  the  outstanding  feature 
of  that  period  was  the  occurrence  of  a  great  war,  with  its 
immediate  Incitement  to  certairt  special  industries,  and  its 
usual  effects  of  Inflation  and  subsequent  collapse. 

A  recovery  from  the  crisis  of  1857  would  have  been  in 
order,  but  the  actual  results  were  given  shape  entirely  by  the 
outbreak  of  the  Civil  War.  This  meant,  as  usual,  a  pre- 
liminary collapse  of  industry,  followed  by  a  sharp  recovery 
in  such  lines  as  furnished  military  products.  The  four  years 
of  war  wrecked  the  iron  industry  of  the  southern  states  for 
several  decades,  while  they  stimulated  iron  and  steel  output 
in  the  north  to  an  excessive  degree.  As  the  currency  depre- 
ciated, because  of  the  usual  war  Inflation,  prices  rose  to  as- 
tounding heights,  and  business  of  all  sorts  reached  its  usual 
unsound  condition.  The  end  of  the  war  found  business  and 
industrial  conditions  in  thoroughly  bad  shape,  north  as  well 


THE  DEVELOPMENT  OF  AMERICA  41 

as  south.  The  fact  that  the  customary  payment  for  the 
military  debauch  was  not  exacted  immediately,  but  deferred 
for  almost  a  decade,  was  due  to  certain  local  factors. 

Two  chief  reasons  may  be  ascribed  as  causes  of  the  delay 
In  collapse  after  the  Civil  War,  one  involving  a  factor  whose 
effects  already  have  been  noted  at  other  times,  and  the  other 
showing  the  first  great  effects  of  protection.  We  were  left 
at  thef  close  of  the  Civil  War  with  very  high  prices,  a  vast 
government  debt,  heavy  taxation,  depreciated  currency,  over- 
expanded  plants  and  a  great  labor  surplus.  Under  ordinary 
conditions  these  would  have  Implied  a  long  period  of  heavy 
imports  and  of  unemployment  at  home.  What  seems  to 
have  saved  the  day,  after  a  brief  time  during  which  labor 
surplus  caused  unrest,  was  the  almost  immediate  great  de- 
velopment of  railroad  building  and  settlement  in  the  west. 
This  new  market  for  both  labor  and  materials  took  the 
strain,  for  the  time,  off  the  situation.  But  ordinarily  this 
would  have  implied,  considering  relative  prices,  that  foreign 
goods  would  have  supplied  much  of  the  new  demand,  par- 
ticularly along  the  lines  of  steel  products.  Here  the  protec- 
tive tariff  entered  very  definitely,  and  so  far  as  we  can  see, 
for  the  first  time  In  American  history  it  was  the  decisive 
factor  in  development.  All  previous  tariffs  had  been  com- 
paratively light  and  with  very  little  permanence.  But  dur- 
ing the  Civil  War  the  tariffs  had  been  placed  at  very  high 
figures,  partly  as  compensation  for  very  high  internal  taxes 
on  business,  and  they  were  continued  at  these  high  figures 
for  many  years,  long  after  the  Internal  taxes  had  been  re- 
duced and  abolished. 

Under  these  conditions,  of  a  large  new  demand  and  a 
protected  market,  the  industries  of  America  grew  rapidly, 
in  spite  of  the  thoroughly  unsound  financial  conditions  which 
underlay  them.  It  was  not  until  1873  that  the  delayed  col- 
lapse finally  appeared  so  that  we  had  the  remarkable 
phenomenon  presented  of  a  country  which  had  been  forced 
to  market  its  six  per  cent,  bonds  at  30   (in  gold),  taking 


43  COAL,  IRON  AND  WAR 

the  lead  in  extravagance  and  expansion  within  a  decade. 

The  period  1 857-1 873  saw  no  great  American  invention 
in  the  iron  or  steel  industries,  but  it  did  see  the  adoption  in 
the  United  States  of  the  two  great  modern  steel-making 
processes,  and  the  commencement  of  manufacture  in  both 
lines.  The  Bessemer  process  had  been  developed  in 
England  about  1855  ^Y  Bessemer  and  Mushet,  and  reached 
a  commercial  stage  in  that  country  before  i860.  Here  it 
was  experimented  with  shortly  after  Its  English  success  was 
evident,  and  Bessemer  steel  became  a  commercial  commodity 
toward  the  close  of  the  Civil  War.  Open-hearth  or  Sie- 
mens-Martin steel,  the  invention  of  Siemens  (German)  and 
the  Martins  (French),  worked  out  In  France  and  England 
about  1864,  was  taken  up  as  an  American  industry  In  1868. 
None  of  the  processes  used  before  1855  had  succeeded  in 
making  steel  which  could  be  produced  in  large  quantity  at 
any  reasonable  price,  with  the  result  that  prior  to  this  time 
wrought  iron  was  In  use  for  structural  railroad  and  ship- 
building purposes  for  which  we  now  use  steel.  The  general 
adoption  of  the  Bessemer  process  made  it  possible  to 
broaden  the  steel  market  to  a  very  unexpected  extent,  but 
these  effects  were  not  noticeable  during  the  period  now 
under  review,  for  as  late  as  1871  the  United  States  produced 
less  than  100  thousand  tons  of  steel  of  all  kinds,  as  com- 
pared with  an  annual  output  of  almost  two  million  tons 
of  pig  iron.  A  successful  war  has  only  a  shade  less  evil 
effects  on  technical  development  than  a  losing  war. 

There  was,  however,  one  development  of  great  Impor- 
tance to  the  steel  Industry  which  took  place  during  this 
period,  but  It  was  not  due  to  invention.  Reference  Is  made 
to  the  growth  in  use  of  iron  ores  from  the  Lake  Superior 
region.  The  first  discovery  of  ore  In  that  district  had  been 
made,  it  is  true,  in  1844,  and  as  early  as  1850  small  test 
shipments  had  been  made  to  a  Pennsylvania  furnace,  but 
shipment  on  any  serious  scale  was  prevented  by  transporta- 
tion difficulties.     In  1855,  however,  a  ship  canal  was  opened 


THE  DEVELOPMENT  OF  AMERICA  43 

at  Sault  Ste.  Marie,  and  In  1857  the  Marquette  mines  were 
connected  with  Lake  Superior  by  rail.  It  was  now  possible 
to  send  ore  east  in  quantity,  and  the  tonnages  mined  and 
shipped  increased  steadily,  reaching  the  million-ton  mark 
in  1 873.  The  ore  was  a  high-grade  hematite,  carrying  close 
to  60  per  cent,  iron  and  very  low  In  phosphorus.  It  was 
an  Ideal  ore  for  the  Bessemer  process,  and  goes  far  toward 
explaining  the  rapid  growth  of  that  process  as  the  Lake 
Superior  region  developed. 

So  far  as  quantity  of  production  was  concerned,  the  period 
here  discussed  showed  remarkable  growth.  In  i860,  the 
iron  output  of  the  United  States  was  a  little  over  800 
thousand  tons,  while  by  1873  it  had  reached  over  two  and 
a  half  million  tons.  And  what  was  more  to  the  point, 
though  this  was  a  period  of  world-wide  activity,  the  Ameri- 
can output  had  gained  faster  than  that  of  its  leading  rival, 
for  It  had  more  than  tripled  in  the  thirteen  years,  while  the 
British  output  had  not  quite  doubled.  Nevertheless,  the 
close  of  the  period  still  showed  Great  Britain  with  a  safe 
lead,  making  six  and  a  half  million  tons  of  iron  as  compared 
with  the  two  and  a  half  made  in  the  States.  Germany  was 
still  a  close  third  in  output,  making  only  a  few  hundred 
thousand  tons  less  than  America,  but  the  loss  of  Lorraine 
had  retarded  French  progress,  and  her  output  as  fourth 
was  far  behind  the  leaders. 

Leadership  and  world  competition,  1873-19 10.  The 
United  States  had  arrived  by  1873,  as  has  been  seen,  at  a 
"veiry  high  level  of  Industrial  development,  but  in  the  years 
to  come  a  new  rise  was  to  take  place  from  this  level,  which 
would  place  America  In  the  lead  among  manufacturing  na- 
tions, and  which  would  furthennore  bring  it  into  contact 
with  world  competition  In  neutral  markets. 

The  panic  of  1873  ^^^  ^^^  resulting  liquidation  brought 
about  widespread  financial  disaster,  but  after  a  brief  period 
of  uncertainty  the  Iron  and  steel  Industries  took  up  their 
growth,  so  far  as  output  was  concerned,  at  the  rapid  rat? 


44 


COAL,  IRON  AND  WAR 


of  increase  which  had  become  accepted  as  characteristically 
American.  Railroad  expansion  was  resumed  so  quickly  that 
the  resulting  fixation  of  capital  could  bring  about  another 
crisis  as  early  as    1884.     Other  industries  were   showing 


2 


2     2!i3 

as       ojos 


65,000.000 


60.000.000 


55.000.000 


50.000.000 


«  45.000.000 

0 
0 

H 

•g  40.000.000 

.a  35.000,000 

I 

1 30.000.000 

0 


25.000.000 


20.000.000 


15.000.000 


10.000.000 


5.000.000 


Oi- 


Fig.  3. 


Annual  production  of  iron  ore,  pig  iron,  and  steel  in  the  United  States, 
1870-1914.  (U.  S.  Geog.  Survey.) 

equal  rates  of  growth,  and  our  production  in  all  lines  in- 
creased largely.  So  far  as  the  iron  and  steel  industries  are 
concerned,  the  growth  during  the  period  between  the  panic 
of  1873  and  the  World  War  is  well  brought  out  in  figure  3. 


THE  DEVELOPMENT  OF  AMERICA  45 

But  along  with  the  growth  of  industrial  output  and  of^  J 
national  wealth,  which  were  of  themselves  very  good  things, 
there  were  some  related  or  accessory  matters  which  were 
not  so  pleasant  to  see.  For  during  the  three  decades  after 
the  Civil  War  the  United  States  fell  to  a  low  average  level 
of  political  and  business  morahty  which  had  not  been 
equaled  before  or  since,  and  along  with  the  rise  of  sudden 
and  over-great  fortunes  we  had  also  the  rise,  for  the  first 
time  in  America,  of  a  conscious  proletariat.  The  causes  of 
the  falling  off  from  America's  earlier  moral  and  pohtical 
standards  was  not  far  to  seek.  The  men  who  had  come 
back  from  four  years  of  war,  during  which  force  was  natur- 
ally looked  to  as  a  prompt  solution  of  difficulties,  were 
naturally  not  squeamish  about  the  uses  to  which  force  might 
be  put:  and  as  for  those  who  had  stayed  at  home  and 
sold  supplies  to  the  government,  they  were  —  just  as  our 
profiteers  of  to-day.  In  politics,  then,  we  had  a  corruption 
which  was  shameless  and  unrebuked;  and  to  realize  the 
depths  to  which  the  nation  had  fallen  we  need  only  suggest 
the  carpet-bag  domination  of  the  south,  the  Tweed  ring  in 
New  York,  the  election  of  1876,  the  Credit  Mobilier.  In 
business  we  did  not  rise  far  above  the  same  moral  level,  and 
the  era  of  railroad  wrecking  for  profit  was  characteristic. 
Industrially,  strange  practices  were  allowed  and  even  en- 
couraged, in  the  name  of  competition;  and  the  railroad  re- 
bate was  the  mildest  weapon  employed. 

As  the  eighties  passed  away  the  standards  raised  again, 
and  with  the  coming  of  Roosevelt  the  country  came  to  accept, 
and  to  insist  on,  far  higher  levels  of  business  and  political 
morality.  And  in  doing  so  it  often  forgot  that  the  com- 
mercial practices  of  which  it  now  complained  had  grown 
up  naturally  enough,  under  public  knowledge  and  public  ap- 
proval. It  was  far  easier  to  charge  the  blame  to  one  man 
or  to  one  group  of  men,  rather  than  to  admit  that  the 
whole  public  sentiment  had  been  for  many  years  at  fault. 
It  is  worth  while  bearing  these   facts  in  mind  when  we 


46  COAL,  IRON  AND  WAR 

come  to  consider,  and  attempt  to  appraise,  the  great  changes 
in  the  industrial  structure  which  came  about  after  the 
Spanish  War. 

For  if  the  end  of  the  nineteenth  century  saw  the  advance 
of  the  United  States  to  world  leadership  in  the  great  basal 
industries,  it  also  saw  the  rapid  massing  together  of  former 
industrial  competitors  in  great  combinations  or  "  trusts." 
The  period  from  1898  on  to  1906  was  the  one  in  which 
this  phenomenon  was  best  displayed  in  America ;  it  had  taken 
place  at  a  somewhat  earlier  date  in  England  and  in  Germany. 
The  forms  which  the  new  industrial  organization  tended 
to  take,  and  the  causes  and  effects  of  these  re-groupings, 
will  be  discussed  in  a  later  chapter  (Chapter  XIX),  and 
need  not  be  further  considered  here,  where  we  need  only 
note  that  one  of  the  first  effects  of  the  great  consolidations 
was  to  aid  markedly  in  creating  an  increased  American  ex- 
port trade  in  manufactured  commodities. 

In  colonial  days  the  American  colonies  had  been  large 
exporters,  for  the  times,  but  always  of  agricultural  or  prac- 
tically raw  products.  This  condition  continued  long  after 
independence,  and  from  1790  to  1890  the  agricultural  prod- 
ucts sent  abroad  steadily  made  up  from  75  to  85  per  cent, 
of  the  total  value  of  our  exports.  In  the  last  decade  of 
the  century  this  relation  was  to  change  very  markedly,  with  a 
resultant  increase  in  the  importance  of  manufactured  exports. 
The  totals  of  our  foreign  trade  had  of  course  increased 
from  year  to  year,  and  in  1892  our  exports  for  the  first 
time  exceeded  one  thousand  million  dollars.  Of  this  four- 
fifths  was  made  up  of  agricultural  products,  mainly  of  course 
cotton,  meats  and  wheat.  Of  the  two  hundred  million  dol- 
lars contributed  by  non-agricultural  products,  petroleum  ac- 
counted for  forty  millions,  and  iron  and  steel  manufactures 
for  thirty,  while  wooden  goods  were  valued  at  twenty-five 
millions,  and  leather  manufactures  at  twelve.  Perhaps  the 
most  direct  summary  of  the  situation,  even  at  that  late  date, 
is  simply  to  .say  that  in  .the  year  pf  1892  finished  manjufac- 


THE  DEVELOPMENT  OF  AMERICA  47 

tures,   ready  for  consumption,   amounted  to   only  thirteen 
per  cent,  of  our  total  export  trade. 

Two  decades  later  the  situation  as  regards  exports  had 
changed  greatly.  The  total  value  of  exports  had  about 
doubled,  exceeding  in  19 12  two  thousand  million  dollars. 
But  this  increase,  though  large  in  itself,  was  not  so  remark- 
able as  the  change  in  its  components.  Since  1892  there  had 
been  a  steady  falling  off,  not  in  the  total  of  agricultural  ex- 
ports, but  in  their  importance  as  compared  with  manufac- 
tures, and  in  19 12  for  the  first  time  in  the  history  of  the 
country  agriculture  contributed  less  than  half  of  the  total 
exports.  The  products  which  made  up  the  other  half  were 
chiefly  copper,  petroleum  and  wooden  products,  each  of 
which  amounted  to  around  one  hundred  million  dollars  in 
value.  Agricultural  implements,  cars  and  steel  manufac- 
tures were  important,  but  less  so  than  the  three  groups  just 
named.  Summarizing  again,  the  finished  manufactures 
amounted  now  to  thirty  per  cent,  of  the  total  exports,  as 
compared  with  thirteen  per  cent,  twenty  years  before.  The 
United  States  was  fairly  started  as  a  competitor  in  world 
trade,  and  from  now  on  would  necessarily  take  a  keener 
interest  in  world  affairs  —  industrial,  financial  and  political. 


CHAPTER  III 
THE  GROWTH  OF  GERMANY 

In  discussing  industrial  growth  in  Great  Britain  and  in  the 
United  States,  we  have  been  dealing  with  a  history  spread 
out  over  one  hundred  and  fifty  years,  and  with  a  relatively 
even  growth  throughout  that  long  period.  But  in  taking 
up  the  question  of  industrial  development  in  Germany  we 
have  to  deal  with  a  record  whose  real  points  of  interest 
fall  within  a  far  shorter  period,  and  which  therefore  gives 
an  appearance  of  particularly  rapid  and  intensive  growth. 
It  may  be  noted  that,  from  the  writer's  standpoint,  this 
rapidity  of  development  was  not  an  unnatural  or  isolated 
phenomenon,  but  that  it  is  a  consequence  of  the  very  radical 
differences  which  exist  between  natural  physical  evolution 
and  social  evolution.  When  we  come  to  discuss  Japan  we 
will  find  a  still  more  remarkable  case  of  this  sort,  and  we 
may  reasonably  expect  that  in  future  the  world  will  come 
to  realize  that  the  normal  development  of  a  nation  does 
not  now  necessarily  mean  its  slow  development. 

But  we  may  set  aside  these  more  general  questions  for 
later  discussion,  and  for  the  present  confine  attention  to  the 
actual  facts  as  regards  the  industrial  growth  of  Germany. 
That  is  still  a  matter  of  the  highest  concern  to  the  peoples 
of  all  the  nations,  not  merely  as  a  record  of  past  achieve- 
ments, but  in  its  bearing  on  the  future. 

The  period  of  slow  development,  prior  to  1870.  As  we 
will  see  later,  there  are  very  good  reasons,  not  only  from 
the  political  but  from  the  more  important  economic  stand- 
point, for  dividing  the  history  of  German  industrial  develop- 
ment into  two  parts,  and  for  fixing  1870  as  the  date  separat- 
ing these  two  periods. 

48 


THE  GROWTH  OF  GERMANY  49 

We  can  not  undertake  here  to  trace  the  gradual  political 
evolution  which  built  up  a  modern  German  Empire,  as  that 
existed  in  19 14,  out  of  some  of  the  states  which  had  formed 
the  Holy  Roman  Empire  of  earlier  days.  For  our  present 
purposes  it  will  be  necessary,  however,  to  call  attention  to 
the  fact  that,  prior  to  1870,  the  word  "  Germany"  was  a 
very  convenient  but  also  very  loosely  defined  geographic 
term,  without  any  definite  political  significance.  The  vague 
and  shifting  significance  of  the  word  makes  it  very  difficult 
to  work  out  very  precise  comparisons  of  industrial  condi- 
tions at  different  dates,  for  the  older  statistical  data  with 
regard  to  population,  production  and  other  factors  of  in- 
terest were  naturally  not  grouped  in  accordance  with  our  re- 
cent conceptions  of  the  extent  of  Germany.  An  attempt  has 
been  made,  in  the  discussion  which  follows,  to  make  this 
grouping,  and  to  consider  the  growth,  as  a  unit,  of  the  area 
which  from  1870  to  19 18  made  up  the  modern  German 
Empire. 

As  Europe  emerged  slowly  from  the  Dark  Ages,  the  areas 
which  later  formed  the  German  Empire  showed  a  relatively 
rapid  growth  in  industry  and  commerce,  so  that  for  a  time 
they  were  in  these  respects  far  in  advance  of  most  of  the 
other  countries  of  Europe.  But  all  this  gain,  and  more, 
was  lost  by  the  protracted  struggles  of  the  Thirty  Years 
War,  during  which  the  territory  of  Germany  was  ravaged  as 
widely  and  as  thoroughly  as  had  been  that  of  France  during 
the  preceding  English  wars.  Some  estimates  assume  that 
at  the  end  of  this  period  of  devastation  the  population  of 
Germany  was  reduced  to  a  third  of  its  original  numbers. 
We  do  not  need  to  accept  these  estimates  at  their  face 
value,  but  even  a  fraction  of  these  losses  would  be  sufficient 
to  dampen  down  industrial  activities,  not  for  years,  but  for 
centuries.  Fortunately  the  center  of  war  activities  shifted 
elsewhere  for  a  time,  and  with  the  exception  of  destruc- 
tive French  activities  in  the  Rhine  areas,  Germany  was  not 
again  the  main  storm  center  until  the  time  of  Frederick  the 


50  COAL,  IRON  AND  WAR 

Great.  His  wars,  however,  though  temporarily  exhausting, 
were  carried  on  by  the  use  of  relatively  small  mercenary 
armies  on  both  sides,  and  did  not  bring  about  the  wide- 
spread destruction  that  had  been  characteristic  of  earlier, 
and  would  again  appear  in  later,  types  of  warfare.  To  get 
the  destructive  effects  of  war  in  their  most  complete  form 
we  must  look  to  wars  in  which  the  whole  populace  takes  an 
active  part. 

At  the  close  of  the  Seven  Years'  War,  peace  again  ap- 
peared in  Germany  for  a  time,  and  from  1763  onward 
there  was  in  consequence  a  marked  renewal  of  industrial 
activities.  This  date  corresponds  roughly,  it  will  be  re- 
called, with  the  commencement  of  the  Industrial  Revolu- 
tion in  England;  and  the  progress  made  in  Prussia  and 
Saxony  seems  to  imply  that  the  new  impetus  to  production 
was  early  felt  there.  The  developments  ran  in  the  direc- 
tion of  textiles,  as  in  England,  and  we  have  records  of  steam- 
run  mills  as  early  as  1788.  But,  after  a  short  respite,  Ger- 
many is  again  plunged  into  a  long  series  of  wars,  at  first 
unjustifiable  attempts  to  crush  liberty  in  France,  but  later 
entirely  justifiable  and  popular  struggles  against  Napoleonic 
absolutism,  from  the  last  of  which  she  emerged  only  in 
18 15.  Truly,  if  war  is  really  ever  "  fresh  and  joyous," 
the  German  people  by  that  time  must  have  become  the 
gayest  in  Europe. 

From  18 1 5  onward,  a  half  century  of  peace  gave  at  last 
free  opportunity  for  industriirt  development  in  a  normal  way. 
After  the  first  heavy  rush  of  British  rmports  in  18 15-18 16, 
and  the  world-wide  commercial  troubles  which  closely  fol- 
lowed around  1819,  this  development  took  place  in  Ger- 
many as  in  the  United  States,  showing  its  first  real  begin- 
nings in  the  decade  between  1820  and  1830.  It  will  be  of 
interest  to  make  some  comparisons  between  the  two  coun- 
tries at  those  dates,  in  order  to  get  some  idea  as  to  their 
relative  position  then,  and  their  later  rates  of  growth. 

In  1830  the  states  which  later  made  up  the  German  Em- 


THE  GROWTH  OF  GERMANY  51 

pire  had  a  total  population  of  some  27  million,  as  compared 
with  13  million  at  the  same  date  In  the  United  States. 
Germany  was  then  producing  about  120,000  tons  of  pig- 
iron,  as  against  perhaps  190,000  tons  in  the  States;  but 
on  the  other  hand  the  German  output  of  coal  was  then 
about  five  times  as  great  as  the  American,  being  1500  thou- 
sand tons  against  300  thousand.  We  can  assume,  then,  that 
though  in  iron  production  the  United  States  was  already- 
well  in  the  lead,  the  German  states  were  probably  much 
further  ahead  in  general  manufactures.  Both  countries,  of 
course,  were  still  unimportant  by  comparison  with  Great 
Britain,  which  at  that  date  was  producing  some  700,000 
tons  of  pig  iron  and  probably  well  over  twenty  million  tons 
of  coal  annually. 

We  might  make  a  further  observation  on  these  German 
iron  production  figures,  were  we  to  study  them  more  care- 
fully, paying  regard  to  the  rate  of  annual  growth  during 
different  decades.  That  would  lead  to  the  conclusion  that, 
though  the  first  great  advance  in  rate  occurred  in  the  United 
States  during  the  decade  1 820-1 830,  the  corresponding  leap 
In  production  was  not  shown  by  the  German  iron  industry 
until  the  period  1 845-1 855.  Putting  the  matter  into  still 
more  general  form,  we  can  fairly  say  that  the  commence- 
ment of  Intensely  rapid  industrial  advance  in  Great  Britain 
took  place  almost  exactly  forty  years  before  it  occurred  in 
the  United  States,  and  sixty  years  before  it  started  in  Ger- 
many. 

The  facts  just  stated  are  of  importance,  as  tending  to 
counteract  the  idea  that  during  certain  given  periods  in 
world  history  development  occurs  about  alike  in  all  nations. 
This  theory  of  progress  is  widely  accepted,  though  it  is 
rarely  stated  In  such  definite  terms.  It  underHes  the  as- 
sumption, for  example,  that  during  the  latter  part  of  the 
eighteenth  century  there  was  a  widespread  Industrial  Re- 
volution, not  only  In  England,  but  in  all  other  countries. 
We  will  return  to  consideration  of  these  comparative  figures 


52  COAL,  IRON  AND  WAR 

in  a  later  section,  when  the  causes  and  average  rate  of  in- 
dustrial progress  are  under  discussion.  And  at  that  time 
we  will  see  also  that  another  theory  —  that  of  "  special  na- 
tional genius  "  for  some  particular  line  of  development,  is 
also  confuted  most  clearly  by  facts. 

Recurring  to  the  progress  of  German  Industry,  it  can 
be  said  that  the  first  sharp  increase  in  rate  of  growth,  so 
far  as  the  coal  and  iron  industries  were  concerned,  took, 
place  after  the  revolutionary  movement  of  1848  In  Europe 
had  subsided.  During  those  few  troubled  years  there  was 
little  to  incite  industrial  growth,  and  the  final  failure  of 
revolutionary  attempts  led  on  the  contrary  to  large  Ger- 
man emigration  to  America.  But  soon  after  Europe  came 
back  to  stable,  even  if  autocratic  government,  internal  im- 
provements were  commenced.  Among  these  was  the  early 
Prussian  system  of  State  railways,  and  by  i860  there  were 
close  to  seven  thousand  miles  of  railroad  In  Germany,  as 
contrasted  with  340  miles  open  in  1840.  This  growth  di- 
rectly and  Indirectly  aided  the  Iron  and  coal  industries,  and 
the  output  of  Iron  showed  Its  first  great  jump  about  1853. 
The  rise  then  begun  lasted  until  interrupted  by  the  world- 
wide crisis  of  1857,  but  after  a  brief  pause  the  development 
recommenced  at  a  still  more  rapid  rate. 

To  sum  up,  the  German  Iron  Industry  beginning  after 
1850  showed  a  very  steady  annual  increase  for  a  long  period 
of  years.  In  1850  Germany- was  making  about  400  thou- 
sand tons  of  pig  iron;  by  1870  this  had  more  than  tripled. 
The  rate  of  growth  was  not  as  rapid  as  that  of  the  American 
industry,  but  the  fluctuations  from  year  to  year  were  less. 
There  was  promise  of  a  sound  and  steady  development  in 
this  as  in  other  Industries,  In  the  German  states  as  con- 
stituted and  organized  in  1869.  But  this  status  was  not 
to  endure,  for  in  that  year  the  German  states  were  on  the 
threshold  of  a  decade  of  very  remarkable  military  and 
political  change  —  a  period  whose  ideas,  at  first  remarkably 


THE  GROWTH  OF  GERMANY  53 

favorable  to  intensive  industrial  growth,  were  later  to  have 
fatal  developments. 

Before  taking  up  these  changes  and  their  effects,  it  will 
be  well  to  get  an  idea  of  the  growth  which  had  been  actually 
accomplished  up  to  this  time,  in  the  states  which  were  later 
to  form  the  Empire.  In  1870  Germany  had  a  population 
of  around  39  millions,  an  increase  of  some  45  per  cent,  over 
that  of  1830.  But  her  iron  output  was  now  1400  thousand 
tons,  an  increase  of  over  1000  per  cent,  while  her  coal  pro- 
duction had  risen  to  34  million  tons,  an  increase  of  almost 
2200  per  cent.  England  was  still  far  in  the  lead  in  both 
respects,  but  since  1830  both  the  United  States  and  Ger- 
many had  gained  at  a  far  more  rapid  rate,  and  were  grad- 
ually closing  up  the  gap.  Turning  to  a  closer  competitor, 
Germany  had  during  those  four  decades  of  peaceful  growth 
passed  France  as  a  producer  both  of  coal  and  of  iron,  though 
as  regards  iron  the  lead  was  very  trifling.  But  as  a  mat- 
ter of  fact  both  Germany  and  France  had  reached  close 
to  the  maximum  of  possible  development  with  the  ores  and 
processes  then  available.  The  process  that  would  make  a 
cheap  competitive  steel  possible  was  still  in  the  future;  the 
ores  that  could  be  utilized  by  such  a  process  were  still,  so 
far  as  Germany  was  concerned,  across  a  frontier.  The  next 
stage  in  advance  is  marked  by  the  acquisition  of  the  ores  and 
the  development  of  the  process. 

Robbery  under  arms,  1870-71.  In  dividing  the  history 
of  German  industrial  expansion  into  two  periods,  1870  has 
been  taken  as  the  dividing  date.  This  is  not  because  the 
rate  of  increase  actually  changed  sharply  at  that  date,  but 
because  the  results  of  the  Franco-Prussian  war  made  very 
remarkable  additions  to  the  material  bases  upon  which  any 
future  industrial  development  must  rest,  and  also  brought 
about  changes  in  political  conditions  which  would  ultimately 
be  of  service  in  future  industrial  growth. 

During  the  few  years  immediately  preceding  the  struggle 


54  COAL,  IRON  AND  WAR 

with  France,  Prussia  had  come  rapidly  to  the  front  as  the 
leading  Genman  power,  a  condition  which  no  statesmen  fore- 
saw ten  years  previous.  In  1864,  in  friendly  cooperation 
with  Austria,  she  had  attacked  Denmark,  while  France  and 
England  watched  the  outrageous  robbery  with  calm  aloof- 
ness. Two  years  later,  a  quarrel  over  the  division  of  the 
Danish  spoils  had  resulted  in  the  very  speedy  and  complete 
elimination  of  Austria  from  German  leadership;  and  had 
incidentally  revealed,  if  any  one  had  been  interested  to  note 
the  fact,  that  a  great  strategist  was  in  control  of  a  hard- 
fighting  and  very  well-organized  military  machine. 

Vague  promises  of  territorial  repayment  elsewhere  had 
kept  Napoleon  III  neutral  while  Austria  was  being  beaten, 
and  now  his  own  turn  was  at  hand.     It  seems  likely  enough 
that  the  war  between  France  and  Prussia  would  have  come 
anyway,  at  some  later  date,  but  unfortunately  the  exigencies 
of  Imperial  policy  led  Napoleon  to  accept  a  very  poor  op- 
portunity indeed  in  1870,  and  to  place  France  in  the  posi- 
tion of  apparently  forcing  a  war  with  Prussia  over  a  very 
unimportant  question.     The  military  and  political  credit  of 
the  Empire  had  been  lowered  by  its  abandonment  of  Maxi- 
miHan  in  Mexico,   and  its  moral  credit  had   always  been 
negligible.     So  the  French  emperor  went  hopefully  to  his 
last  great  adventure,  and  the  French  people  were  to  pay 
bitterly  for  their  twenty-year  acceptance  of  Imperial  sham. 
As  for  allies,   there  were  none,  much  though  this  fact 
may   surprise   us    to-day.     England    freed,    by    Bismarck's 
prompt   assurance,    from    fear   for    Belgium,    stood   aside. 
Italy  accepted  the  usual  slight  gratuity;  Austria  was  unwil- 
ling to  try  again;  Russia  was  positively  friendly  to  Prussia 
for  the  time.    So  France,  a'little  more  unprepared  than  usual 
at  the  moment,  went  down  alone  to  defeat.     The  struggle, 
as  an  organized  war,  was  very  short.     The  usual  French 
gambit  —  an  attack  from  the  Lorraine  salient  —  gave  en- 
couragement for  only  a  day  or  two.     After  that  it  was  a 
continuous  story  of  French  defeat  and  surrender.     The  staff 


THE  GROWTH  OF  GERMANY  55 

work  was  atrocious,  and  no  amount  of  courage  could  make 
up  for  lack  of  both  intelligence  and  supplies.  The  Empire 
fell,  and  after  a  brave  but  hopelessly  disorganized  attempt 
to  repair  the  disaster,  the  new  Republic  was  compelled  to 
make  peace. 

Now,  a  word  as  to  the  extent  and  value  of  political  pre- 
vision and  planning,  because  this  is  perhaps  the  best  avail- 
able illustration  of  the  limits  of  both.  The  results  of  this 
war  had  very  great  ultimate  effects  on  Germany,  on  France, 
on  England,  and  on  the  rest  of  the  world.  These  effects 
were  not  only  political  and  military,  but  industrial.  They 
are  recognized  clearly  to-day,  and  the  general  assumption  is 
that  the  war  of  19 14  would  never  have  happened  if  the  war 
of  1870  had  not  been  so  completely  won.  All  the  excited, 
though  pseudo-economic,  war  literature  of  all  the  countries, 
during  the  period  19 14  to  19 19,  recognizes  and  proclaims 
these  facts,  with  the  result  that  we  come  to  have  a  general 
idea  that  they  must  have  been  equally  evident  at  the  time, 
at  least  to  trained  observers. 

But  actually,  when  we  go  back  to  the  books  and  papers  of 
that  period,  in  an  attempt  to  discover  just  how  the  matter 
Impressed  the  people  of  1871,  we  find  little  trace  of  any 
recognition  that  anything  serious  had  happened  to  the 
world.  In  France,  1870  was  looked  upon  as  a  purely  mili- 
tary and  political  humiliation,  which  the  nation  would  hope 
to  avenge  some  day  by  equally  purely  military  means.  In 
England,  there  was  at  first  frank  pleasure  over  the  final 
elimination  of  Louis  Napoleon,  and  perhaps  a  little  quiet 
relief  that  the  historic  enemy  across  the  Channel  would  be 
likely  to  give  little  occasion  for  alarm  for  some  time,  but 
after  the  fall  of  the  Empire  English  liberals  and  others 
protested  unofficially  against  the  treatment  which  the  new 
republic  received;  there  was  however  not  a  trace,  so  far  as 
can  be  found  in  the  literature  or  speeches  of  the  day,  to  sug- 
gest that  anyone  recognized  the  fact  that  a  new  and  far 
more  dangerous  opponent  had  come  to  power,     In  Germany 


56  COAL,  IRON  AND  WAR 

Itself  the  war  seems  to  have  been  regarded,  even  by  the 
statesman  who  conducted  it,  as  a  military  and  political  suc- 
cess, which  aided  German  unity,  gave  a  good  frontier, — 
and  nothing  more.  Throughout  the  world  there  was  not 
one  trace  of  the  idea,  now  generally  accepted,  that  very 
obviously  a  new  and  dangerous  military  and  industrial 
Power  had  appeared,  with  aims  different  fom  those  of  other 
powers,  and  with  different  Ideas  as  to  the  possible  means 
for  carrying  those  aims  into  effect.  If  indeed  this  was 
obvious  to  the  men  of  1871,  it  is  remarkable  that  there  was 
not  a  single  politician,  economist  or  soldier,  in  warring  or 
neutral  country,  who  expressed  himself  publicly  to  that  ef- 
fect.    So  much  for  political  and  industrial  foresight. 

And  this  last  is  very  surprising,  for  in  all  truth  the  out- 
standing result  of  the  Franco-Prussian  war  was  Industrial. 
It  has  been  said,  in  a  book  written  and  published  before  the 
recent  World  War  was  in  sight,  that  "the  war  of  1870  was 
in  reality  an  exchange  of  blood  for  iron  in  a  way  that  the 
world  has  not  appreciated."  To-day,  with  the  rapid  edu- 
cation that  has  come  about  since  19 14,  we  can  all  appre- 
ciate the  matter.  Every  journalist  can  now  tell  you  that,  at 
the  close  of  the  Franco-Prussian  war,  the  boundary  was 
drawn  so  as  to  give  Germany  half  of  the  most  valuable 
iron  ore  deposit  In  Europe,  and  one  of  the  largest  in  the 
world.  What  he  does  not  tell  you,  and  probably  does  not 
yet  know,  is  that  though  this  statement  Is  true  enough,  it  was 
not  understood  at  the  time  by  anyone  In  either  France  or 
Germany.  We  have  said  something  as  to  the  limited  fore- 
sight of  the  politician;  let  us  see  what  trained  scientific 
leadership  accomplished. 

The  boundary  line,  as  has  been  said,  was  drawn  so  as  to 
include,  as  we  now  know,  less  than  half  of  the  Lorraine 
iron  ore  field.  That  It  Included  so  much  seems  to  have 
been  due  to  the  direct  efforts  of  German  geologists;  that  It 
did  not  take  in  all  of  the  field  was  due,  partly  to  scientific 
stupidity   and   partly   to   an   excusable   lack   of   prevision. 


THE  GROWTH  OF  GERMANY  57 

From  the  memoirs  and  letters  that  have  been  published,  we 
see  that  neither  Bismarck  nor  the  army  leaders  cared  much 
about  the  matter,  but  did  want  an  extension  to  cover  Bel- 
fort.  But  France  was  obdurate  about  Belfort,  and  as  a 
choice  between  two  evils,  preferred  to  give  up  more  of 
Lorraine;  while  an  eminent  German  geologist  laid  stress 
upon  the  importance  of  taking  in  the  iron-ore  territory. 
The  idea  was  sound,  but  the  execution  was  shockingly  bad, 
owing  to  the  prevalence  of  the  scientific  error  that  has  been 
referred  to  above.  As  we  now  know,  the  Lorraine  ores 
are  of  sedimentary  origin,  forming  true  flat-lying  beds,  and 
can  be  followed  underground  for  great  distances,  like  coal- 
seams.  But  in  1870  the  weight  of  scientific  authority  held 
another  idea  —  i.e.,  that  they  originated  by  replacement 
from  the  surface,  and  that  therefore  the  ore  would  dis- 
appear a  short  distance  below  the  outcrop.  This,  by  the 
way,  is  one  of  the  most  persistent  of  scientific  stupidities; 
it  has  been  applied  not  only  to  Lorraine,  but  to  the  similar 
ores  of  Newfoundland  and  ^Alabama.  In  each  case  it  has 
cost  a  good  deal  of  money;  and  in  the  case  of  Lorraine  it 
has  cost  a  war. 

So,  under  the  influence  of  this  idea,  the  boundary  was 
finally  drawn  a  relatively  short  distance  back  of  the  out- 
crop; and  most  of  the  known  and  visible  ores  passed  into 
German  control.  Years  later,  the  use  of  brains  and  drilling 
machinery  demonstrated  that  the  ores  did  persist  in  depth, 
and  that  the  region  that  had  been  left  in  French  hands  was 
underlain  by  much  more  ore  than  had  been  turned  over  to 
Germany.  This  later  work  will  be  recurred  to  in  discus- 
sing French  development.  At  present,  having  mentioned 
the  scientific  error  which  had  been  introduced  into  the  ques- 
tion, we  may  go  on  to  the  other  important  (and  in  1870 
equally  unknown)  factor  which  was  to  affect  the  value  of 
these  ores. 

It  must  be  realized  that  in  1870  the  Lorraine  iron  region 
did  not  have  the  same  relative  importance,  as  compared  to 


58  COAL,  IRON  AND  WAR 

other  European  areas,  that  it  later  assumed.  This  fact 
must  be  borne  in  mind  in  order  to  get  a  clear  idea  as  to  how 
the  new  boundary  line  was  regarded  by  both  German  and 
French  manufacturers.  The  difficulty  then  existing,  and 
later  overcome,  was  in  relation  to  the  composition  of  the 
Lorraine  iron  ores,  a  purely  technical  matter,  but  with  very 
important  industrial  results.  The  Lorraine  ores  are  typi- 
cally high  in  phosphorus,  and  the  pig-iron  made  from  them  is 
of  course  very  high  indeed  in  that  element.  That  meant  that 
in  1870  they  were  not  ores  that  could  be  used  in  the  steel 
industry,  for  the  Bessemer  process,  as  at  first  introduced, 
did  not  eliminate  phosphorus  at  all.  A  pig-iron  suitable  for 
the  original  Bessemer  process  had  to  be  practically  free  from 
phosphorus.  This  limitation  left  the  Lorraine  ores,  as  were 
our  own  Alabama  ores  at  the  same  date,  entirely  worthless 
from  the  steelmaker's  standpoint,  but  free  for  use  where 
a  very  fluid  cast  iron  was  desired.  They  were  strictly 
foundry  irons,  not  steel-making  irons.  And  the  industrial 
world  was  then,  under  the  stimulus  of  the  large  tonnages  of 
cheap  steel  which  the  Bessemer  process  could  yield,  turning 
from  the  use  of  iron  to  the  use  of  steel.  Lorraine  in  1870 
seemed  to  have  a  good  but  very  limited  future. 

But,  fortunately  for  Germany  as  well  as  for  the  rest  of 
the  world,  Lorraine  was  not  the  only  region  which  had  an 
over-supply  of  phosphoric  iron  ores.  England  was  similarly 
placed  with  regard  to  her  cheapest  ores,  Alabama  was  in 
the  same  straits,  and  the  vast  Newfoundland  deposits 
later  developed  would  show  the  same  difficulty.  So  there 
was  a  direct  incentive  to  the  study  of  possible  processes  for 
making  good  and  cheap  steel  from  a  high-phosphorus  pig- 
iron.  In  1870,  however,  there  was  no  such  process  in 
actual  use,  or  even  well  advanced  experimentally. 

The  solution  was  to  come  from  England,  but  not  until 
1879.  In  that  year  Thomas  and  Gilchrist,  two  remarkable 
cousins,  gave  to  the  industrial  world  a  very  convincing 
demonstration  of  a  new  steel-making  process  which  they  had 


THE  GROWTH  OF  GERMANY  59 

publicly  described  in  the  preceding  year.  This  was  the  basic 
Bessemer  or  Thomas-Gilchrist  process,  whose  essential 
feature  was  the  use  of  a  basic  (line  or  magnesia),  lining  to 
the  Bessemer  converter,  this  lining  making  almost  complete 
removal  of  any  phosphorus  contained  in  the  pig-iron. 
Seemingly  a  very  simple  matter,  the  new  process  was  In 
reality  a  very  brilliant  technical  achievement,  which  resulted 
In  wide-spread  industrial  changes.  Primarily,  It  made  it 
possible  to  utilize  the  cheaply  operated  Bessemer  converter 
for  making  steel  from  a  phosphoric  pig-iron;  but  secondar- 
ily it  put  an  actual  premium  on  the  use  of  such  irons,  for  It 
was  soon  found  that  the  phosphorus  eliminated  from  the  iron 
combined  with  the  lime  to  form  a  phosphoric  slag,  valuable 
as  a  fertilizer.  By  crediting  the  sales  value  of  this  by- 
product against  the  cost  of  steel  making,  the  new  basic 
Bessemer  process  showed  cheaper  steel  than  did  the  old  or 
acid  Bessemer  method.  Iron  ores  high  In  phosphorus  now 
had  a  new  place  In  the  industrial  world,  and  the  Lorraine 
iron  region  would  come  into  its  own. 

The  period  of  rapid  growth,  1870-19 10.  In  following 
out  the  later  developments  which  gave  the  Lorraine  ores 
their  high  recent  value,  we  have  over-run  somewhat  the 
story  of  industrial  growth  after  the  war. 

Industrially  considered,  the  actual  spoils  of  the  war  were 
great  enough  even  at  their  then  value.  The  conquerors 
received  the  five  milliards  of  gold,  which  Incidentally  was 
currently  credited  with  being  In  large  part  the  inciting  cause 
of  the  great  German  industrial  activity  of  the  years  which 
immediately  followed,  though  this  is  a  question.  But  in  real 
assets  they  received  an  Industrious  population  of  one  and 
a  half  millions,  a  large  wheat  area,  a  thriving  cotton  indus- 
try, and  a  well  developed  iron  region.  As  regards  this  lat- 
ter more  particularly,  we  may  say  that  it  included  not  only 
the  greater  part  of  the  outcrop  of  the  Lorraine  Iron  ore 
field,  but  a  group  of  Iron  making  plants.  The  eight  or 
more  plants  which  now  found  themselves  on  the  German 


6o  COAL,  IRON  AND  WAR 

side  of  the  frontier  had  an  output,  just  before  the  war,  of 
some  half  million  tons  of  pig-iron  annually.  Further,  Ger- 
many also  received  that  portion  of  the  Sarre  coal-field  which 
had  been  left  French  In  1815  —  a  portion  which  represented 
perhaps  a  fourth  of  the  entire  field. 

The  direct  and  Immediate  gains  through  this  affair  were 
therefore  considerable,  and  showed  promptly  in  the  swelling 
of  the  production  returns  of  Germany  with  a  corresponding 
falling  off  In  French  output,  in  the  years  following  the  war. 
The  iron  output  In  Germany  proper,  excluding  Luxemburg, 
was  for  example  in  the  year  before  the  war  1290  thousand 
tons;  in  the  year  after  the  close  of  war,  18 10  thousand  tons; 
the  gain  represented  almost  exactly  the  product  of  the 
French  furnaces  acquired. 

During  the  decade  which  succeeded  the  war,  the  Lorraine 
ores  were  still  limited  in  use,  owing  to  the  conditions  pre- 
viously discussed,  and  the  Iron  output  of  Germany  rose  only 
some  fifty  per  cent.  In  the  ten  years.  But  with  the  inven- 
tion of  the  basic  Bessemer  process  in  England,  and  its 
prompt  adoption  In  Germany,  the  rate  of  growth  quickens 
immediately.  In  the  decade  1 880-1 890  the  German  pig- 
iron  production  increased  almost  one  hundred  per  cent.; 
and  In  the  two  succeeding  decades  the  same  rate  of  progress 
was  maintained.  By  19 10,  therefore,  Germany  was  pro- 
ducing close  to  fifteen  million  tons  of  pig-iron  annually,  as 
compared  with  the  1400  thousand  tons  of  1870  and  the  120 
thousand  of  1830.  Though  the  United  States  was  still  far 
in  the  lead  as  an  iron  producer.  Great  Britain  had  been 
passed  by  Germany  around  1900,  and  Industrial  progress 
in  other  directions  had  been  equally  surprising. 


CHAPTER  IV 
THE  RETARDATION  OF  FRANCE 

In  the  previous  sections,  when  discussing  the  industrial 
development  of  Great  Britain,  Germany  and  the  United 
States,  we  dealt  with  the  effects  of  such  growth  In  a  group 
of  singularly  fortunate  countries,  where  the  progress  once 
begun  was  allowed  to  continue  peacefully  until  It  had  ar- 
rived at  a  high  level.  But  In  the  case  of  France,  now  to  be 
discussed,  this  was  not  the  case.  During  the  early  period, 
when  the  British  Empire  and  the  United  States  were  laying 
the  foundations  for  modern  industrialism,  France  was  sub- 
jected for  over  two  decades  to  an  exhausting  series  of  wars 
—  wars  which  began  purely  defensively,  upon  her  own  soil, 
which  ended,  after  brilliant  intermediate  successes,  in  final 
military  defeat.  Then,  after  a  period  during  which  in- 
dustrialism had  an  opportunity  to  commence  growth,  there 
was  again  a  defensive  war  on  French  soil,  costly  alike  in 
men,  territory  and  money.  The  development  which  had 
begun  was  for  a  time  checked  sharply,  and  finally  thrown 
into  new  channels.  It  Is  only  to-day  that  it  Is  possible  for 
French  industry  to  recommence  development  along  the 
lines  that  would  have  seemed  normal  In  1869. 

Manufactures  had  begun  early  In  France,  as  in  medieval 
Germany,  but  their  growth  had  been  checked  by  the  same 
causes.  For  France  the  record  before  1650  would  in- 
clude a  century  of  English  aggression,  during  which  the 
greater  part  of  France  was  laid  waste  by  royal  bandits;  and 
then,  after  an  interval  of  relative  peace,  another  century  of 
religious  and  other  civil  wars.  From  all  this  a  strong 
power  emerged,  it  is  true,  but  In  the  face  of  constant  ex- 
posure to  external  and  Internal  attacks,  the  strength  was 
gained  only  through  the  unhealthy  development  of  over- 
centralized  and  autocratic  government.     In  England,  free 

61 


62  COAL,  IRON  AND  WAR 

from  serious  fear  of  Invasion  or  conquest,  there  had  been 
a  fairly  steady  growth  of  individual  liberty  and  of  popular 
control  for  many  centuries.  But  in  France,  exposed  on  all 
frontiers,  the  early  attempts  at  democratic  institutions  had 
left  no  successors  and  few  traces.  The  manufacturing  de- 
velopment which  did  take  place  under  these  conditions  was 
necessarily  to  a  large  extent  directly  fostered  and  con- 
trolled by  the  state,  sometimes  aided  by  government 
bounties,  more  often  hampered  by  government  restrictions. 

During  the  years  of  military  glory  which  came  to  France 
between  1650  and  1750,  the  strain  on  the  resources  of  the 
country  was  becoming  heavier  each  year,  and  the  population 
of  all  classes  were  suffering  under  the  taxation  necessary  to 
support  such  glory.  The  Seven  Years'  War,  more  dis- 
astrous at  sea  than  on  land,  resulted  in  the  loss  of  the  first 
French  colonial  empire,  in  the  further  contraction  of  French 
external  commerce,  and  in  a  still  heavier  strain  on  the  people. 
An  autocratic  government  has  only  one  real  excuse  for  its 
existence  —  that  it  can  more  efficiently  protect  its  people 
against  external  aggression  than  can  a  democracy.  When 
it  fails  in  even  this,  there  is  na  longer  any  reason  to  tolerate 
it.  With  its  unsuccessful  foreign  wars,  and  its  crushing  in- 
ternal taxation  and  abuses,  royal  government  in  France 
was  about  to  go  the  same  road  that,  over  a  century  later, 
would  be  followed  by  kaiser  and  czar. 

Revolution  and  war,  1 785-1815.  For  almost  exactly 
three  decades  France  was  to  struggle  through  internal  re- 
forms and  revolutions,  followed  by  external  wars.  But 
before  we  take  up  the  industrial  effects  of  these  changes,  it 
will  be  well  to  get  some  idea  of  the  status  of  France,  in  this 
respect,  just  before  the  period  of  violent  change  had  arrived. 
For  this  there  are,  fortunately,  ample  data;  for  the  very 
centralization  which  hampered  French  development  in  some 
directions  gives  us  better  records  than  we  have  available  for 
the  early  years  in  England  and  America. 

In  1787,  immediately  before  the  Revolution,  France  was 


THE  RETARDATION  OF  FRANCE  63 

mining  a  little  over  two  hundred  thousand  tons  of  coal,  and 
Importing,  chiefly  from  England,  an  almost  exactly  equal 
quantity.  At  that  date,  for  comparison,  the  output  of  the 
United  States  was  negligible,  but  England  was  producing 
perhaps  six  million  tons  a  year.  In  the  Iron  trade  France 
ranked  below  England,  the  United  States  and  the  Baltic 
countries,  but  above  her  later  competitor  Germany.  The 
domestic  crude  Iron  production  may  have  been  twenty  thou- 
sand tons,  but  there  were  Imports  of  almost  as  much,  which 
went  Into  further  manufactures.  Textiles,  on  the  other 
hand,  were  In  better  relative  shape,  particularly  the  woolen 
and  linen  manufacture.  An  estimate  of  about  this  date 
places  the  value  of  French  textile  manufactures  at  90  million 
dolla*rs,  of  which  the  linen  trade  accounted  for  25  millions. 
The  four  years  of  political  unrest  which  Immediately  fol- 
lowed were  unfavorable  to  the  growth  of  French  industry, 
or  even  to  maintenance  of  Its  1788  status.  There  was  a 
steadily  increasing  pressure  of  imports  from  England,  due 
to  the  rapidly  expanding  British  manufactures,  and  this  at 
a  time  when  the  French  market  was  being  slowly  but  surely 
contracted,  by  the  emigration  of  capital  and  persons  from 
the  kingdom.  But  this  state  of  depression  seems  to  have 
arrived  at  Its  climax  before  1793,  to  be  succeeded  by  the 
usual  burst  of  feverish  activity  which  always  marks  Inflation 
of  the  currency.  Left  to  itself  this  very  Inflation  would 
have  brought  about  a  still  more  disastrous  cpllapse  of  In- 
dustry, but  its  effects  In  that  direction  were  masked  by  the 
outbreak  of  war  and  the  invasion  of  France.  The  other 
powers  of  Europe  could  no  longer  watch  undisturbed  the 
growth  of  liberty  in  France,  and  Prussia,  Austria  and  Eng- 
land united  to  crush  It.  The  Issue  joined  then  was  not 
properly  a  question  as  between  nation  and  nation;  It  was 
the  issue  between  democracy  and  autocracy,  for  both  sides 
realized  that  the  two  could  not  coexist  on  the  European  con- 
tinent. It  would  be  over  a  century  before  that  issue  was 
settled,  again  forced  by  an  equally  Inexcusable  Invasion,  again 


64  COAL,  IRON  AND  WAR 

to  be  justified  by  the  same  theory  that  an  efficient  autocracy 
must  protect  the  world  against  an  Inefficient  democracy. 

During  the  two  decades  of  constant  war  which  followed 
the  Revolution,  France  was  to  learn  that  a  strict  enemy 
blockade  Is  in  reality  a  far  more  efficient  stimulus  to  both 
invention  and  manufacture  than  is  a  protective  tariff.  The 
United  States  had  an  almost  contemporaneous  experience, 
of  much  the  same  type,  pointing  in  the  same  direction,  and 
the  Confederate  States  of  America  were,  at  a  much  later 
period,  to  show  the  same  effects. 

The  French  coal  output,  for  example,  almost  quadrupled 
in  a  decade,  for  in  1802  the  domestic  production  had  risen 
to  over  800  thousand  tons.  This  was  a  rate  of  growth 
rarely  shown  in  any  country  at  any  time.  Imports  of  Bnt- 
ish  coal  had  ceased,  it  is  true,  so  that  the  increase  in  domes- 
tic mining  did  not  attain  a  corresponding  increase  In  con- 
sumption. But  there  was  still  a  hundred  thousand  tons  of 
coal  annually  coming  in  from  Belgium,  Westphalia  and  the 
Rhine  Provinces,  and  when  this  is  allowed  for  we  find  that 
actual  consumption  in  France  had  more  than  doubled  In  a 
decade.  The  increase  was  not  kept  up  for  many  years, 
however,  for  in  the  long  run  the  steady  drainage  of  men 
would  necessarily  tell  on  industry.  With  the  beginning  of 
final  failure,  in  the  Spanish  and  Russian  adventures,  coal 
output  falls  off  slowly,  reaching  less  than  700  thousand  tons 
in  the  critical  year  18 14. 

During  this  same  two  decades  of  enforced  protection, 
other  industries  had  shown  equal  or  even  greater  develop- 
ment. The  domestic  iron  trade,  for  example,  had  more 
than  quadrupled,  probably  reaching  close  to  100,000  tons 
annually  during  the  more  prosperous  years  of  the  empire. 
It,  too,  fell  off  toward  the  close  of  the  period.  Meanwhile 
the  textile  Industries  had  grown  largely.  Chaptal's  esti- 
mate of  18 1 2  places  their  annual  value  at  some  160  mil- 
lion dollars,  a  growth  of  over  75  per  cent,  since  1788.  Of 
this  total,  wool  and  linen  accounted  for  almost  a  third  each, 


THE  RETARDATION  OF  FRANCE  65 

while  silks  and  cottons  made  up  the  remainder.  There  had 
been  French  invention  at  work,  as  well  as  adoption  of  Eng- 
lish machinery,  during  the  intervening  period,  for  Jacquard 
had  invented  his  loom  in  1804.  For  comparison,  the  value 
of  French  textile  industries  about  18 10  may  have  been  two 
thirds  that  of  Great  Britain:  the  total  value  of  all  manu- 
factures  perhaps  half  that  of  her  rival. 

The  first  developments,  1815-1870.  During  the  period 
between  Waterloo  and  Sedan,  French  industry  pursued  its 
growth  unchecked  by  external  aggression,  limited  only  by 
its  natural  resources  and  by  the  vagaries  of  internal  politics. 
With  regard  to  the  latter  point,  France  was  not  alone  in  her 
misery,  for  Great  Britain  and  the  United  States  have  passed 
through  much  the  same  experiences  during  their  industrial 
growth.  But  so  far  as  the  question  of  natural  resources  is 
concerned,  the  cases  are  not  similar  in  the  slightest  degree, 
and  this  fact  must  be  borne  in  mind  when  we  compare  indus- 
trial development  as  between  the  nations.  Hitherto,  in  out- 
lining the  history  of  such  development  in  Great  Britain,  in 
the  United  States  and  in  Germany,  we  have  been  dealing 
with  three  countries  exceptionally  favored  by  nature  in  two 
very  important  respects  —  the  presence  within  their 
boundaries  of  large  and  cheaply  mined  deposits  of  coal  and 
of  iron  ore.  Now,  when  we  come  to  deal  with  France,  we 
have  in  hand  an  example  of  entirely  different  type  —  of  a 
country  deficient  in  the  most  important  of  these  raw  ma- 
terials, and  whose  development  has  consequently  followed 
different  lines. 

At  the  close  of  the  Napoleonic  Wars,  however,  this  point 
was  not  so  evident,  for  except  in  Great  Britain  coal  develop- 
ments were  relatively  slight  all  over  the  world,  and  their 
ultimate  importance  was  not  anticipated.  Furthermore, 
though  the  Allies  had  turned  over  to  Prussia  the  bulk  of  the 
Sarre  coalfield  in  181 5,  they  had  permitted  France  to  retain 
the  smaller  portion  of  that  basin  which  was  in  Lorraine, 
with  several  producing  coal  mines. 


66  COAL,  IRON  AND  WAR 

France  passed,  like  all  the  world,  through  a  long  period 
of  depression  after  the  great  wars,  and  in  1836  was  making 
but  little  more  iron  than  in  18 15.  The  first  real  growth, 
as  in  Germany,  took  place  around  1850,  and  was  apparently 
due  to  the  same  local  inciting  cause  —  the  development  of 
railways.  At  any  rate  an  iron  output  of  perhaps  100,000 
tons  a  year  in  1830  had  become  800  thousand  tons  by  i860, 
and  reached  one  million  tons  in  1864.  But  at  this  point 
increased  output  stopped  for  a  time,  and  it  was  not  until 
1869  that  the  million  ton  mark  was  again  reached,  only  to 
be  followed  by  the  disaster  of  1870.  The  effect  of  the 
Franco-Prussian  War,  and  of  the  peace  which  followed  it, 
have  been  discussed  in  the  previous  chapter,  and  the  matters 
involved  need  not  be  brought  up  again  here.  It  is  sufficient 
to  say  that  France  lost  the  remnant  of  the  Sarre  coal  field, 
the  bulk  of  the  known  Lorraine  iron  ores,  several  groups 
of  furnaces,  and  a  large  fraction  of  her  cotton  industry. 

Renewed  development,  1871-1910.  After  the  losses  of 
the  war  and  of  the  peace,  there  was  a  year  of  uncertainty, 
industrial  as  well  as  political,  and  then  France  commenced 
to  rebuild  her  wrecked  industries.  The  free-trade  treaty 
with  England,  which  had  depressed  French  iron  manufac- 
tures in  the  decade  after  i860,  was  not  renewed,  and  from 
that  time  on  France  became  even  more  strictly  a  protec- 
tionist country.  The  iron  industry,  however,  was  still 
hampered  by  purely  natural  restrictions  as  to  coal  and  ore 
supply,  and  its  slow  growth  even  under  protection  throws 
light  on  the  inadequacy  of  the  latter,  alone,  to  force  output. 
The  iron  output,  which  as  has  been  noted  had  reached  one 
million  tons  by  1864,  did  not  pass  the  two  million  ton  mark 
until  after  1880;  and  then,  for  over  a  decade,  showed  no 
advance  whatever.  From  1898  on  there  was  another 
period  of  growth,  so  that  the  iron  output  reached  four  mil- 
lion tons  by  19 10,  and  over  five  million  tons  in  19 13.  These 
rates  of  growth.  It  will  be  seen,  were  very  slow  by  com- 
parison with  these  shown  in  the  United  States  and  Germany 


THE  RETARDATION  OF  FRANCE  67 

during  the  same  periods,  so  that  France  was  losing  ground 
in  this  one  industry,  relative  to  the  two  leaders,  but  not 
compared  to  the  rest  of  the  world.  Just  before  the  World 
War  the  French  iron  output  amounted  to  about  six  per  cent, 
of  the  world's  total.  There  had  been  Indeed  little  change 
In  her  rank  or  percentage  since  1850,  for  though  America 
and  Germany  had  grown  faster,  England  had  fallen  off  in 
rate  of  growth,,  and  none  of  the  newer  competitors  could  as 
yet  aspire  to  France's  position. 

The  difficulty  which  France  had  experienced  in  the  de- 
velopment of  the  iron  Industry  was  of  entirely  natural 
origin,  and  could  not  be  overcome  even  by  high  protection. 
Her  coal  supplies  were  small,  relative  to  those  of  other 
great  industrial  nations,  and  even  this  supply  was,  with  the 
exception  of  one  large  field  along  the  Belgian  frontier, 
widely  scattered  in  a  large  number  of  small  deposits  all  over 
the  country.  No  closely  grouped  large  Industry  depending 
on  heavy  use  of  coal  could  grow  up  under  such  conditions. 
On  the  other  hand,  these  very  conditions  were  an  Inducement 
to  a  system  of  scattered  local  manufactures  which  might 
nevertheless  yield  a  large  total  output,  particularly  In  such 
Industries  as  used  only  small  amounts  of  fuel;  and  that  is 
what  really  occurred.  France  became  perhaps  the  best 
modern  example  of  widely  scattered  industry,  as  compared 
with  the  highly  concentrated  industry  grouped  around  great 
coalfields,  which  arose  in  England,  Germany  and  America. 

The  final  result  of  the  natural  factors  involved  has  been 
the  creation,  in  France,  of  a  number  of  small  manufacturing 
centers,  and  the  development  along  lines  In  which  fuel  Is 
not  a  principal  component  of  cost.  France  has  therefore 
produced  the  textiles,  particularly  silks,  cottons  and  woolens; 
high-grade  clay  products,  such  as  porcelains;  and  other  pro- 
ducts of  similar  highly  finished  type.  For  special  reasons, 
the  occurrence  of  bauxite  in  southern  France  and  the  electric 
power  available  along  the  upper  Rhine,  the  aluminum  manu- 
facture has  been  greatly  expanded. 


CHAPTER  V 

THE  STIRRING  IN  THE  EAST 

Meanwhile,  during  the  later  years  of  the  development 
whose  history  in  western  Europe  and  North  America  has 
been  sketched,  a  change  of  great  future  importance  was 
taking  place  elsewhere.  Asia  was  beginning  an  industrial 
career  along  modern  Hnes,  with  all  that  this  implied. 

For  many  centuries  European  trade  with  the  East  had 
been  carried  out,  and  at  times  on  a  very  large  scale.  But 
this  trade  had  always,  from  the  European  and  later  from 
the  American  standpoint,  been  a  question  of  finding  a  good 
market  for  finished  products,  and  of  securing  local  raw 
products  in  exchange.  Silks  and  porcelains  had  been  about 
the  only  manufactured  goods  brought  from  China  and 
Japan  to  western  markets.  The  bulk  of  the  eastern  ship- 
ments had  been  along  other  and  strictly  non-competitive 
lines  —  teas,  camphor,  spices. 

The  eastern  trade  had  progressed,  but  not  in  an  entirely 
smooth  and  uninterrupted  way,  for  the  two  great  Eastern 
Nations  had  not  been  able  to  appreciate  immediately  the 
benefits  of  European  intercourse  and  civilization.  In  the 
middle  of  the  nineteenth  century  Great  Britain  had  even 
been  forced  to  war  on  China,  in  order  to  compel  that  unwil- 
ling and  backward  empire  to  accept  opium.  But  these  east- 
ern markets  had  been  too  good  to  lose,  so  Europe  and 
America  had  put  up  with  many  discouragements  and  diffi- 
culties in  order  to  secure  a  dumping  ground  for  manufac- 
tured goods  at  high  prices.  Now,  toward  the  close  of  the 
century,  a  change  came  in  the  affairs  of  the  East,  and  a  new 
specter  arose  to  trouble  the  dreams  of  diplomats.  We  had 
just  become  accustomed  to  thinking  of  "  lower  races  "  in 
terms  of  the  comforting  theory  of  the  White  Man's  Bur- 

68 


THE  STIRRING  IN  THE  EAST  69 

den,  when  we  were  startled  to  find  that  part  of  the  burden 
had  ideas  of  its  own  on  the  subject,  and  curiously  indepen- 
dent ideas  at  that.  The  weight  of  the  burden  was  lightened, 
but  to  compensate  for  that  relief  the  shadow  of  the  Yel- 
low Peril  fell  over  the  western  world.  And  that  has  never 
lifted. 

Prior  to  the  political  and  industrial  awakening  in  the 
East,  western  ideas  as  to  the.  two  great  Asiatic  powers  had 
been  very  indefinite,  and  not  particularly  farsighted.  We 
knew  that  China  contained  a  vast  population,  who  wore 
pigtails,  made  dinner  plates,  and  fought  with  firecrackers. 
The  Japanese  were  small  people  who  spent  their  time  drink- 
ing tea  under  the  cherry-blossoms.  We  knew  also  that  the 
two  countries  furnished  a  very  good  market  for  cotton 
goods,  and  that  therefore  any  foolish  Asiatic  ideas  as  to 
non-intercourse  must  be  sternly  suppressed.  Finally,  con- 
stant demands  for  money  reminded  us  that  at  a  very  large 
expenditure  per  head  a  very  small  percentage  of  these 
heathen  could  be  reclaimed,  and  made  into  real  Christians, 
though  even  those  converts  showed  a  strange  reluctance  to 
adopt  European  habits  and  vices.  There  is  very  little  ex- 
aggeration in  the  preceding  summary  —  it  probably  repre- 
sents fairly  the  knowledge  of  China  and  Japan  possessed 
in  1870  or  even  1890  by  the  average  European  or  American 
statesman. 

But  even  more  embarrassing  than  general  lack  of  knowl- 
edge as  to  Asiatic  possibilities  was  the  fact  that,  of  the  two 
possible  contestants,  Europe  in  general  backed  the  wrong 
horse.  The  truth  was  that  most  of  our  Asiatic  misinfor- 
mation was  derived,  directly  or  indirectly,  from  diplomats 
and  missionaries.  Now  these  two  classes  made  a  very 
natural  error.  They  were  greatly  impressed  by  the  vast 
extent  and  mere  bulk  of  Chinese  territory  and  population; 
they  could  not  realize  that  quick  intelligence  and  activity 
might  for  a  time  at  least,  make  up  for  this  mass.  It  was 
the  Russian  myth  over  again;  for  it  was  exactly  the  same  as 


70  COAL,  IRON  AND  WAR 

if  an  Eskimo  or  Argentino  had  been  brought  from  his  plains 
to  Europe,  to  be  greatly  impressed  by  the  vast  expanses  of 
Russia,  and  to  think  little  of  the  workshop  island  off  the 
European  coast. 

War,  immigration  or  competition.  As  to  the  exact  form 
which  this  Yellow  Peril  will  take,  that  is  a  matter  for  wide 
differences  of  opinion  and  prophecy,  depending  perhaps  in 
large  part  on  the  personal  ideas  and  tastes  of  the  prophet. 
A  distinguished  personage,  now  temporarily  residing  in  Hol- 
land, has  been  the  leading  exponent  of  one  school  of  thought. 
He  saw  the  future  conflict  as  the  incursion  of  vast  hordes  of 
barbarians,  sweeping  over  Europe  from  the  Urals  to  the 
Channel,  submerging  beneath  them  all  traces  of  civilization, 
destroying  mines  and  mills,  cities  and  cathedrals,  killing 
women  and  children.  His  ideas  may  be  correct;  they  cer- 
tainly are  natural  enough,  and  they  are  shared  by  some  mili- 
tary authorities  and  many  civilians.  To  their  holders  the 
only  possible  defenses  against  the  Asiatic  advance  are  mili- 
tary preparations  —  and  the  partition  of  China  among 
civilized  powers.  The  school  agrees  on  this  general  pro- 
gram, though  there  are  some  minor  differences,  notably 
as  to  which  Chinese  provinces  would  furnish  the  surest 
guarantees  against  the  Yellow  Peril,  and  as  to  which  powers 
should  undertake  the  greater  share  of  the  White  Man's 
Burden. 

To  another  group,  the  serious  feature  of  the  situation  is 
the  assumed  over-population  of  the  Far  East,  and  the  dan- 
ger that  less  crowded  countries  will  be  crushed  down  by  the 
weight  of  undesirable  Immigration,  with  consequent  lower- 
ing in  both  wages  and  in  living  standards.  These  views 
have  a  more  solid  basis  in  fact  than  those  just  mentioned, 
and  are  accepted  pretty  generally  In  Australia,  New  Zealand, 
British  Columbia  and  the  western  United  States.  The 
remedy  suggested  Is,  inevitably  enough,  more  or  less  com- 
plete racial  exclusion. 

A  third  school  of  thought,  however,  tends  toward  the 


THE  STIRRING  IN  THE  EAST  71 

belief  that  the  development  of  the  Far  East  will  express 
itself,  at  least  for  a  long  time  to  come  primarily  in  the 
form  of  Increasingly  severe  Industrial  competition  from  a 
base  on  Its  own  soil.  I  believe  that  this  Is  the  correct  view- 
point, and  I  believe  further  that  the  possible  rapidity  and 
extent  of  that  competition  are  generally  very  much  under- 
rated. 

For  it  is  to  be  noted  that  all  three  schools  agree  on  cer- 
tain basal  facts,  and  disagree  merely  in  the  possible  conse- 
quences. The  point  of  agreement  Is  as  to  the  existence  of 
a  tremendous  mass  of  man-power  In  the  Far  East  —  of  a 
huge  population  with  hard-living  Industrious  habits,  of  a 
low  standard  of  living,  and  of  but  slightly  developed  indus- 
trial openings.  Considered  without  reference  to  natural 
conditions  as  to  raw  material  supplies,  there  is  little  reason 
to  choose  between  the  three  schools  of  thought,  but  when 
we  come  to  examine  this  question  later  it  will  be  seen  that 
in  China  we  are  dealing  with  one  of  the  great  coal  reserves 
of  the  world.  Under  these  conditions  the  form  which  de- 
velopment of  the  yellow  races  is  likely  to  take  seems  less 
uncertain. 

So  In  real  life  the  danger  of  Asiatic  development  is  likely 
to  express  itself  not  in  the  form  of  a  Japanese  guard  In  your 
city  hall,  or  of  Asiatic  laborers  in  your  factories,  but  In  the 
form  of  Chinese  rails  and  woolen  goods  underselling  your 
products,  at  first  in  neutral  markets,  later  perhaps  in  your 
own.  The  fact  that  this  competition  will  not  take  place  in 
this  year  or  this  decade,  the  further  fact  that,  for  reasons 
later  stated.  It  will  not  last  forever,  does  not  In  any  way 
lessen  the  seriousness  of  Its  probable  effects  during  the 
period  that  It  will  be  in  force. 

The  development  of  Japan.  The  first  real  sign  from 
the  East,  despite  earlier  Ideas  as  to  the  two  nations,  came 
not  from  China  but  from  Japan.  Here,  within  the  two 
decades    1871-1891,   a   feudal  nation  was   entirely   recon^ 


; 


72  COAL,  IRON  AND  WAR 

structed  along  modern  industrial  lines.  The  rapidity  of 
the  transformation  lends  point  to  what  was  said  previously 
In  connection  with  German  development  —  that  in  future 
we  may  fairly  expect  to  see  a  very  great  speeding-up  in  such 
processes.  It  is  no  longer  necessary  for  a  nation  to  pass 
through  a  century  of  preparation,  as  did  England  and  the 
United  States;  technical  training  and  massed  capital  are 
now  available  in  such  quantities  as  to  bring  about  great 
changes  in  a  few  years.  Given  an  urgent  necessity,  for 
example,  it  is  likely  that  China  could  be  made  into  the  third 
or  fourth  largest  iron  producer  of  the  world  within  twenty 
years. 

From  the  earliest  days  Japan's  relations  with  Europeans 
had  been  difficult.  A  marked  missionary  effort  by  the 
Jesuits  in  the  sixteenth  century  ended  in  attempts  at  political 
Interference,  and  the  final  expulsion  of  the  missionaries  and 
the  stamping  out  of  native  Christianity.  Shortly  after  that 
the  Dutch  traders  reached  the  islands,  and  as  a  Japanese 
document  naively  says,  **  sent  a  memorial  to  the  Shogun 
intimating  that  those  who  profess  Christianity  have 
treacherous  motives."  The  distinction  between  Christians 
and  Dutchmen  being  made  plain,  the  latter  and  the  Chinese 
were  permitted  to  send  occasional  ships  to  Japan,  but  all 
other  nations  were  barred. 

Beginning  about  1800  European  attempts  to  open  com- 
mercial relations  occurred  at  intervals.  Refusal  to  treat 
with  Russia  was  followed  by  a  sudden  attack  by  Russian 
vessels,  the  devastation  of  one  of  the  islands,  but  the  final 
defeat  of  the  Invaders.  Around  the  middle  of  the  century 
came  our  own  efforts,  carried  out  In  more  decent  fashion, 
and  finally  successful.  Beginning  with  1856,  various  treaty 
ports  were  opened  to  foreigners,  and  the  decade  which  fol- 
lowed saw  the  negotiation  of  commercial  treaties  with  all 
the  leading  nations  of  America  and  Europe. 

Once  begun,   the  modernization  of  Japan  spread  fast. 


THE  STIRRING  IN  THE  EAST  73 

The  adoption  of  various  factors  in  modern  communication 
and  finance  is  shown  as  follows: 

First  telegraph  line  in  Japan 1869 

First   railroad   in  Japan 1870 

Modern  post  office  system  adopted 1871 

Coinage  system  remodelled 1871 

Japanese  ocean  steamers  operated 1875 

Yokohama  Specie  Bank  founded 1880 

Along  with  this  there  had  been  great  changes  in  Japanese 
industry.  The  older  types  of  manufactures  persisted,  as 
indeed  they  do  to  this  day,  but  a  large  development  also 
took  place  along  other  lines.  This  was  speedily  notable 
in  the  decade  1 885-1 895,  when  modern  plants  were  estab- 
lished to  manufacture  cotton  goods,  cement,  matches,  heavy 
chemicals,  paper,  soap  and  glassware.  Shipbuilding  also 
commenced  along  modern  lines  at  this  time.  Some  idea  of 
the  external  effect  of  these  changes  in  commerce  and  indus- 
try is  afforded  by  the  fact  that  the  Japanese  exports  rose 
from  less  than  thirty  million  dollars  in  1885  to  over  eighty 
millions  in  1890. 

The  proofs  that  Japan  had  rapidly  become  a  great  civil- 
ized power  were  not,  however,  afforded  so  strikingly  by  her 
commercial  development  as  by  her  successes  in  war  and  di- 
plomacy. Europe  had  hardly  time  to  recover  from  aston- 
ishment at  seeing  the  war  with  China  finished  very  decisively 
in  favor  of  Japan  (1896),  when  the  naval  alliance  with 
Great  Britain  renewed  uneasiness.  Finally,  the  very  un- 
expected and  complete  victory  over  Russia  made  it  evident 
that  Japan  must  necessarily  be  treated  in  future  as  one  of  the 
great  powers. 


CHAPTER  VI 
THE  STRUGGLE  OF  THE  NATIONS 

It  is  now  a  commonplace  that  the  Victorian  Age  was  a 
period  marked,  in  all  its  phases  and  activities,  by  utilita- 
rianism and  stodginess,  by  convention  and  stupidity.  This 
very  fact  should  rouse  us  to  doubt,  for  whenever  an  idea 
becomes  generally  accepted  it  is  almost  always  untrue.  And 
the  present  case  does  not  offer  one  of  the  rare  exceptions, 
for  in  all  truth  the  latter  half  of  the  nineteenth  century  had 
in  reality  many  claims  to  our  respect  as  well  as  gratitude. 
There  had  been  great  industrial  development,  and  it  is  true 
that  much  of  this  had  ugly  enough  immediate  results.  But 
with  all  this  there  was  a  quick  sympathy  with  the  oppressed, 
within  the  nation  and  without,  and  efforts  to  ameliorate  or 
remove  the  evils  that  were  found  to  exist.  Perhaps  the 
remedies  suggested  and  applied  were  not  sufficiently  radical, 
but  they  were  offered  in  all  sincerity,  and  applied  with  a 
generosity,  as  between  class  and  class,  or  nation  and  nation, 
such  as  had  never  been  seen  before.  The  world  seemed  to 
be  working  slowly  but  steadily  toward  a  condition  of  things 
which  was  to  be  marked  by  the  further  development  of  in- 
dividual liberty  and  national  wealth;  and  this  was  to  be 
accomplished  by  the  stimulation  of  individual  enterprise, 
and  by  free  competition,  but  not  by  armed  conflict  in  the 
nation  or  without. 

But  with  the  passing  of  the  Great  Queen  a  new  and 
harder  note  was  heard.  The  old  creeds  and  the  old  loyal- 
ties had  long  been  undermined,  and  now  the  masses  were 
ready  for  new  revelations.  Under  the  able  guidance  of 
politicians  and  journalists  and  labor  leaders  they  had  not 
far  to  seek. 

74 


THE  STRUGGLE  OF  THE  NATIONS  75 

The  scientific  advances  of  the  past  half  century  had  all 
tended  to  lay  stress  upon  the  universal  applicability  of 
evolutionary  theories,  and  when  these  were  applied  to  social 
problems,  and  pushed  to  their  limit.  In  a  purely  materialistic 
way,  there  were  opportunities  offered  for  trouble.  If  there 
were  no  gods,  why  dream  of  generosity  or  self-sacrifice?  If 
this  world  be  all,  why  not  possess  it  now?  If  natural  evolu- 
tion govern  all  progress,  why  not  allow  survival  of  the 
fittest  to  operate  logically,  and  put  an  end  to  weak  states 
or  to  weak  classes  within  the  state? 

If  we  accept  the  premises,  the  conclusions  reached  are 
certainly  logical  enough.  It  can  be  seen  that  they  operate 
in  two  directions,  affecting  two  quite  different  groups,  both 
powerful  In  modern  states.  And  in  consequence  we  had,  all 
over  the  civilized  world,  two  very  different  doctrines 
preached,  though  both  had  originated  from  the  same  gen- 
eral line  of  reasoning,  applied  however  to  different  basal 
facts  and  conditions.  The  doctrines  which  became  popular 
everywhere,  one  with  politicians  and  the  other  with  laborers, 
were  Imperialism  and  Syndicalism.  One  held  that  a  strong 
and  well  organized  state  Is  free  from  moral  obligation  in  its 
dealings  with  weaker  or  more  primitive  nations.  The  other 
held  that  a  strong  and  well  organized  class  Is  free  from 
moral  obligation  In  Its  dealings  with  a  numerically  weaker 
class  in  the  same  nation. 

Most  of  us  are  guilty  of  having  accepted,  or  at  least 
tolerated,  the  Imperialist  doctrine;  and  for  that  we  have 
paid  bitterly  enough  In  the  four  years  of  war  that  has 
ravaged  the  world.  The  other  doctrine  most  of  us  have 
not  accepted,  and  that  struggle  is  still  before  us.  Militar- 
ism and  Syndicalism,  though  perhaps  equal  curses  to  civili- 
zation, can  not  co-exist;  because  one  appeals  to  nationalistic 
ideas  and  the  other  to  internationalism.  The  Immediate 
effect  of  the  World  War,  therefore,  was  to  postpone  until 
Its  close  the  class-struggle  preached  by  the  syndicalists. 

When  the  long-expected  war  finally  came,  its  immediate 


76  COAL,  IRON  AND  WAR 

cause  was  neither  modern,  nor  industrial,  but  purely  dynas- 
tic and  political.  An  assassination,  used  as  a  pretext  to 
extend  Austrian  overlordship  in  the  Balkans,  a  countermove 
by  Russia  —  and  a  very  inflammable  world  took  fire.  Na- 
tion after  nation  was  drawn  in,  some  by  existing  treaties, 
some  by  violations  of  treaties.  But  in  none  of  this  was 
there  any  trace  of  industrial  influence  for  war.  Its  effects 
appeared  at  a  later  period,  in  broadening  the  scope  of  the 
war,  in  changing  its  methods,  and  in  fixing  its  final  results. 

We  are  not  concerned  with  the  history  of  this  war,  so  far 
as  the  record  of  purely  military  events  is  involved.  But  at 
various  times,  from  the  first  days  of  the  war  to  its  con- 
clusion, there  were  matters  which  must  be  noted,  as  bearing 
either  upon  the  industrial  conditions  of  the  war  itself,  or 
as  throwing  light  upon  its  possible  consequences,  industrial 
and  social.  Three  among  these  points  of  interest  appeared 
within  the  first  month  of  the  war,  and  will  be  discussed  first. 
One  of  them  was  a  purely  psychological  phenomenon,  which 
has  been  witnessed  before,  and  will  often  be  seen  again;  it 
was  the  immediate  change  in  the  attitude  of  such  bodies  as 
the  Socialist  and  Clerical  parties  as  soon  as  war  was  declared. 
The  second  was  the  almost  immediate  loss  by  the  Allies  of 
an  initial  industrial  preponderance,  a  loss  which  prolonged 
the  war  and  changed  its  character.  The  third  was  the 
failure  of  prevision  regarding  the  probable  course  and  dura- 
tion of  modern  war. 

The  failure  of  internationalism.  At  the  outbreak  of  war, 
many  things  happened  as  had  been  expected,  though  per- 
haps more  rapidly  than  one  would  have  thought  possible. 
But,  on  the  other  hand,  some  things  happened  which  could 
not  reasonably  have  been  foreseen,  and  the  most  important 
of  these  was  the  immediate  and  complete  breakdown  of 
internationalism  in  the  socialist  parties  of  all  the  warring 
countries.  That  belief  in  the  international  unity  of  the 
laboring  classes  of  all  countries,  as  against  national  or 
patriotic  claims,  was  swept  away  over  night,  as  if  by  magic. 


THE  STRUGGLE  OF  THE  NATIONS  77 

and  the  day  of  mobilization  saw  the  passing  of  Ulnter- 
nationale  and  the  coming  of  the  Marseillaise.  There  was 
no  question  of  calm  judgment,  on  either  side  of  the  matter, 
and  the  temporary  victory  of  the  national  over  the  labor 
creed  was  merely  that  of  a  strong  primitive  emotion  over  a 
new  and  less  fixed  belief.  But  the  change  was  so  striking, 
not  only  in  France  but  in  Belgium  and  Germany,  that  it 
afforded  one  of  the  chief  points  of  interest  to  the  earliest 
days  of  the  war.  It  was  so  sudden  and  so  complete  that  it 
raises  the  question  whether  the  chief  blot  on  the  record  — 
the  murder  of  Jaures  —  was  not  a  blunder,  as  well  as  a 
crime.  At  the  moment  it  may  have  seemed  necessary  for 
the  safety  of  France,  but  in  all  probability  the  Socialist 
leader  would  have  been  swept  away  with  the  others  in  the 
reaction  from  internationalism  to  patriotism. 

From  the  moment  when,  in  all  the  countries.  Socialist 
leaders  voted  for  the  war  credits,  the  emotional  or  religious 
value  of  that  creed  was  ended,  and  for  the  remainder  of  the 
war  there  was  no  need  to  consider  it  further.  After  the 
war  was  ended,  the  question  would  rise  again  to  vex  the  na- 
tions. 

The  churches,  too,  were  affected  by  the  prevailing 
emotion,  and  in  all  the  warring  countries  Christianity,  like 
Socialism,  lost  all  of  its  international  tendencies  and  be- 
came purely  nationalistic.  This  was  the  case  even  in 
France,  where  the  Church  had  been  for  decades  suffering 
under  the  abuse  and  spoliation  of  socialist  administrations. 
But  when  France  was  once  more  in  danger,  all  this  was 
forgotten,  and  the  Church  set  aside  its  just  grievances  In 
order  to  aid  the  State. 

The  loss  of  industrial  preponderance.  The  war  opened, 
on  the  western  front,  with  two  military  moves  which  im- 
mediately introduced  industrial  factors  of  the  greatest  pos- 
sible importance,  affecting  the  fortunes  of  the  struggle 
throughout,  and  Indeed  threatening  to  bring  it  to  a  decisive 
and  early  close  in  favor  of  the  Central  Powers.     One  of 


78  COAL,  IRON  AND  WAR 

these  moves,  the  German  invasion  through  Belgium,  has 
been  discussed  In  print  to  the  point  of  weariness,  but  the 
discussion  has  been  almost  always  confined  to  Its  ethical 
bearings,  and  has  laid  little  or  no  stress  on  the  point  in 
which  it  now-  Interests  us  —  the  Industrial  danger  Into 
which  it  brought  the  Allied  cause.  The  other  move,  pre- 
ceding the  Belgian  invasion  In  point  of  time,  was  the  with- 
drawal of  the  French  troops  behind  the  frontier  —  and  this 
is  rarely  mentioned  at  all,  though  In  point  of  fact  it  was 
almost  equally  disastrous.  The  two  points  may  be  briefly 
discussed  in  regard  to  their  industrial  effects. 

On  July  30th  the  French  Ministry  of  War  telegraphed 
instructions  for  the  putting  in  position  of  the  covering  troops, 
the  units  which  were  designed  to  conceal  the  actual  mobiliz- 
ation of  the  armies.  But  In  place  of  these  covering  units 
forming  a  screen  close  to  the  frontier,  as  had  been  contem- 
plated In  the  general  mobilization  plans,  It  was  specified 
that  they  were  to  be  withdrawn  to  a  distance  of  ten  kilo- 
metres (say  six  miles)  behind  the  frontier.  This  restriction 
had  no  military  reason,  but  was  political  in  Its  origin.  It 
was  still  uncertain  as  to  what  attitude  England  and  Italy 
would  take,  and  It  was  thought  best  to  avoid  any  chance 
of  a  frontier  clash  which  could  be  used  by  the  Germans  as 
a  plea  that  France  was  the  Invader  and  aggressor.  As  a 
political  move  it  was  successful  and  so  perhaps  justified, 
but  it  threw  practically  all  the  ore  mines,  blast  furnaces  and 
steel  works  of  Lorraine  Into  German  hands  before  war  had 
really  begun.  Almost  half  of  the  French  Iron  and  steel 
producing  capacity  was  lost  before  the  struggle  had  fairly 
commenced.  Industrial  Lorraine  would  remain  German 
until  American  troops  re-occupied  it  In  19 18,  and  for  four 
years  French-built  mills  would  supply  munitions  to  the  in- 
vaders. Such  were  the  consequences  of  political  Interven- 
tion in  a  military  and  Industrial  problem. 

Turning  to  the  Belgian  question,  we  need  only  summar- 
ize the  story  of  another  industrial  disaster.     The  opening 


THE  STRUGGLE  OF  THE  NATIONS 


79 


move  through  Belgium  had  been  discussed  in  military  litera- 
ture for  many  years,  and  its  possibility  had  been  universally 
recognized.  The  original  French  concentration  had,  how- 
ever, been  faulty;  and  Belgian  delays  in  asking  assistance 
had  complicated  the  matter  still  further.  It  was  not  until 
August  4th  that  Belgium  appealed  to  France  and  England. 
French  troops  were  shifted  westward,  English  troops  were 
sent  over  to  join  them;  but  the  combined  forces  available  on 
that  portion  of  the  front  could  not  withstand  the  weight 


July  30.  1914 

Sept.  30.  1914 

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Allies         Central  Allies        Central      Overseas 

E"  Great  Britain     F~ France     R"  Russia     3= Belgium     G'*  Germany 
A= Austria  Ununited  States  €= Canada 

Fig.  4.    Relative  Allied  and  Central  steel  power,  July  and  September,  1914 

that  was  massed  against  them.  A  month  of  rearguard 
actions,  between  Charleroi  and  the  Marne,  and  then  in  Sep- 
tember came  victory  and  the  resulting  German  retreat  to  the 
line  of  the  Aisne.  From  a  purely  military  standpoint  all 
seemed  hopeful;  but  when  the  Germans  dug  in  along  the 
Aisne  all  of  the  Belgian  and  northern  French  coal  fields  were 
north  of  their  lines,  and  so  were  all  of  the  Belgian  and  most 
of  the  remaining  French  steel  plants. 

The  diagram  presented  herewith  (Fig.  4)  shows  in  very 
striking  form  just  what  had  happened,  so  far  as  iron  and 


8o 


COAL,  IRON  AND  WAR 


steel  producing  capacity  was  concerned,  during  the  very 
earliest  weeks  of  the  war.  At  the  outbreak  of  war  the 
Allies  had  an  annual  capacity  of  some  225^  million  tons  of 
iron,  as  compared  with  the  slightly  lower  capacity  (21J/2 
mlUIon  tons)  of  the  Central  Powers.  But  the  occupation  of 
Belgium  and  of  northern  France  had  changed  these  relations 
most  unfavorably  for  the  Allies,  for  at  the  close  of  that 


July  30.  1914                                              Sept.  30.  1914 

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300    J;!i:::::Mi:::::     i^::T±f  J:::T:'^  '^:T"^S:"" 

^  ^  ^^:: ::: ^2^>.  ::::^  ^^ J :::::::    .-ZjlVcIIV----  i^^?i  .-.. 

'//'./             ■'  'y'/tCi  y             '  ■' '( 'jo'                                    ■''/•'/  y  y             -i '' '' y^'y 

\<>)>yr ^^2^^ vl'^ai ±2^^P^ ^^^i^ 

^^  '/Y   ^  ?                '  "    '/  '}f\  /  ''  '  '        "■>''/^/?"|                                             ■■       '/')/'/■'                         /^^/'J'"'"' 

Fig. 


Allied  and  Central  coal-power,  July  and  September,  1914 


first  war  stage  the  AUied  iron  capacity  was  only  about  i6 
million  tons,  as  compared  with  the  Central  Powers'  273^ 
millions. 

With  regard  to  coal  producing  capacity,  the  results  were 
hardly  less  ominous,  as  shown  in  Fig.  5.  Here  we  see  that, 
as  in  iron  and  steel,  the  Allies  had  lost  their  original  pre- 
ponderance in  the  first  days  of  the  war.     In  July  the  Allies 


THE  STRUGGLE  OF  THE  NATIONS  8i 

had  a  coal  producing  capacity  of  some  425  million  tons,  as 
against  the  365  million  tons  of  the  Central  Powers.  But 
the  loss  of  the  great  Pas  de  Calais-Nord  coal  basin  had 
thrown  the  balance  the  other  way,  so  that  in  September  the 
Allied  capacity  was  only  370  million  tons  as  compared  with 
420  million  tons  in  the  hands  of  the  Central  Powers. 

The  ultimate  results  of  these  conditions  as  to  coal-pro- 
ducing and  steel-making  capacity  now  are  obvious  enough 
to  all  of  us,  but  at  the  time  they  were  not  so  evident,  and 
it  was  months  before  the  first  possible  implications  seem 
to  have  permeated  the  political  and  military  intelligence 
on  either  side. 

For  the  Central  Powers,  the  war  had  now  been  reduced 
to  very  simple  elements,  once  the  balance  of  industrial 
power  had  shifted  as  above  described.  So  far  as  the  west- 
ern front  was  concerned,  the  war  was  definitely  won,  pro- 
vided that  the  lines  of  September  19 14  could  be  held,  and 
provided  that  no  new  industrial  factor  intervened.  There 
was  no  need  to  waste  a  single  man  in  any  fruitless  attempt 
to  advance  beyond  these  Hnes  at  any  point;  but  it  was  abso- 
lutely necessary  to  hold  the  lines  firm;  and  it  was  of  still 
more  importance  that  the  advantage  so  gained  should  not 
be  overthrown  by  the  introduction  into  the  problem  of  the 
overwhelming  tonnage  from  overseas.  For,  if  we  refer  to 
the  two  diagrams  above,  we  will  see  that  neither  of  the 
great  European  groups  had  either  coal  or  iron  capacity 
large  enough  to  count  seriously  against  what  could  be  con- 
tributed from  North  America.  In  the  third  column  of 
each  diagram  the  United  States  tonnage  has  been  plotted; 
and  to  this  is  added  in  each  case  the  Canadian  output,  be- 
cause it  was  subject  to  the  same  limitations  of  supply  across 
the  Atlantic.  As  a  counterbalance  against  not  crediting 
Canada  to  the  Allied  column,  the  Swedish  steel  output  has 
been  omitted  from  the  Central  Powers  supply,  where  it  could 


82  COAL,  IRON  AND  WAR 

reasonably  have  been  placed  since  throughout  the  war 
Sweden  was  rather  more  benevolent  (to  Germany)  than 
neutral. 

For  the  Allies,  the  situation  was  equally  clear,  but  less  eas- 
ily met.  It  implied  that  the  war  was  lost  unless  the  German 
seizures  of  the  first  few  weeks  could  be  regained,  and  this 
involved  active  attack  rather  than  the  passive  resistance 
which  was  open  to  the  Central  Powers.  Further,  it  would 
be  necessary  in  case  the  industrial  balance  could  not  be 
quickly  re-adjusted  in  Europe,  to  bring  into  the  scale  the 
vast  North  American  tonnage,  or  at  least  such  portion  of 
it  as  could  be  bought  and  safely  transported.  This  latter 
phase  of  the  matter  led  naturally  to  more  and  more  atten- 
tion being  paid  to  the  questions  of  finance  and  shipping,  and 
in  the  end  it  had  a  decisive  and  unexpected  result. 

As  for  immediate  effects  on  military  operations,  we  may 
therefore  say  that  after  Belgium  and  northern  France  were 
once  occupied,  the  Central  Powers  were  not  compelled  to 
do  more  than  hold  them,  and  were  to  some  extent  left  free 
to  undertake  similar  operations  on  the  Russian  front,  which 
also  had  its  industrial  centers  near  the  boundary.  But  the 
Allies  were  forced  to  attack  on  the  western  front,  and  by 
preference  to  attack  at  some  point  where  victory  would 
mean  immediate  return  of  some  of  the  industrial  spoil. 
Left  as  a  purely  French  military  and  industrial  problem, 
this  would  probably  have  implied  attack  on  the  right,  so 
as  to  regain  the  Briey-Longwy  region.  But  as  an  English- 
French  question  it  was  more  complicated,  and  until  late  in 
19 1 8  it  was  always  interpreted  as  implying  the  necessity 
of  striking  on  the  left,  through  western  Belgium. 

We  must  not,  of  course,  accept  the  statements  which  have 
so  far  been  made,  as  to  the  importance  of  iron  and  coal 
preponderance,  in  too  strictly  materialistic  or  fatalistic 
fashion.  Under  ordinary  conditions  they  would  have  had 
far  less  effect  upon  the  course  and  results  of  a  war,  but 
carried  out  as  this  war  was,  the  question  of  munitions  supply 


THE  STRUGGLE  OF  THE  NATIONS  83 

became  all  Important,  and  here  coal  and  iron  resources 
reached  their  maximum  of  military  and  political  effect.  It 
IS  very  unlikely  that  In  any  future  struggle  they  will  again 
exert  so  much  influence. 

The  failure  of  military  and  financial  prevision.  At  the 
moment  that  the  Germans  definitely  accepted  the  Aisne  line, 
the  war  just  as  definitely  changed  Its  character  and  scope, 
though  no  one  could  have  said  so  at  the  time.  For  during 
its  first  month  the  war  of  19 14,  as  it  was  then  fondly  called, 
had  followed  much  the  course  of  all  textbook  conceptions 
of  what  a  modern  war  would  be  like.  There  had  been 
nothing  strikingly  new  about  its  methods  or  results  in  Bel- 
gium, during  the  retreat,  or  at  the  Marne;  and  indeed  the 
only  great  technical  change  from  1870  had  lain  in  the  free 
employment  by  the  Germans  of  very  heavy  guns  and  mor- 
tars, which  had  been  brought  up  and  moved  with  far  greater 
freedom  than  had  been  thought  possible.  Granted  the 
free  use  of  large-calibre  mortars,  such  incidents  as  Liege 
and  Maubeuge  followed  as  a  matter  of  course. 

But  from  the  latter  part  of  September,  19 14,  onward, 
some  new  features  of  more  than  military  interest  were 
gradually  to  become  obvious.  Industrialism  was  to  take  a 
hand,  and  show  just  how  thoroughly  destructive  modern 
warfare  can  be  made,  when  It  is  carried  to  Its  logical  con- 
clusion. War  was  to  be  no  longer  a  purely  military  struggle, 
between  two  armies,  but  a  far  more  bitter  struggle  between 
the  peoples  themselves,  and  all  the  resources  of  the  new  In- 
dustrialism were  to  be  massed  for  that  struggle. 

Financial  prevision  had  failed  us,  no  less  than  had  mili- 
tary. For  many  years  it  had  been  preached  that  great  wars 
were  impossible,  because  of  the  close  financial  relations  be- 
tween the  international  banking  groups.  This  hope  had 
collapsed  completely  at  the  outset  of  the  struggle,  when  it 
was  seen  that  no  nation  hesitates  to  enter  a  war  because  of 
financial  conditions.  It  was  later  to  be  learned  —  a  lesson 
that  indeed  might  have  been  learned  earlier  from  the  five- 


84  COAL,  IRON  AND  WAR 

year  defense  of  the  Confederate  States  —  that  no  nation 
ever  loses  a  war  because  of  financial  troubles  alone.  The 
feeling  that  the  World  War  would  end  because  of  money 
difficulties  proved  illusive. 

The  industrial  preponderance  regained.  The  United 
States  finally  entered  the  war  —  just  in  time,  as  we  know 
now,  to  save  Europe  from  German  domination,  but  three 
years  too  late  to  save  civilization  from  terrible  losses  and 
future  danger.  In  these  three  years  we  had  ample  time  to 
find  the  profits  that  accrue  to  benevolent  neutrality,  and 
those  we  seized  greedily.  But  we  had  also  opportunities 
to  make  reasonable  preparation  for  a  war,  and  this  we  did 
not  do.  The  result  was  that  the  final  sudden  demand  for 
supplies  threw  unnecessary  strain  on  the  industrial  structure, 
and  increased  the  difficulties  which  always  accompany  war 
conditions.  During  this  period  of  frenzied  production 
world  credit  finally  broke  loose  from  any  connection  with 
a  gold  basis,  and  prices  took  an  upward  course  which  has 
had  evil  effects,  to  which  we  will  have  to  recur  later  in  this 
study. 

Judged  externally,  the  Allied  fortunes  reached  their  low- 
est point  after  the  United  States  had  entered  the  war, 
rather  than  before  it,  for  the  complete  collapse  of  Russian 
morale  and  the  Italian  military  disaster  had  marked  the 
spring  and  fall  of  19 17,  while  as  yet  there  was  no  very 
evident  aid  afforded  by  America.  But  in  reality  the  balance 
had  now  gone  so  heavily  against  the  Central  Powers  that 
their  fall  was  merely  a  question  of  time.  No  possible  mili- 
tary success,  even  the  capture  of  Paris,  could  alter  the  fact 
that  in  the  long  run  they  would  be  crushed  under  the  weight 
of  superior  coal  and  iron  resources  and  man-power. 

There  was,  furthermore,  a  nearer  and  more  immediate 
blow  to  German  hopes.  The  Russian  Syndicalist  move- 
ment, encouraged  by  Germany  at  first  as  a  means  of  weak- 
ening Russian  patriotism  and  breaking  Russian  resistance, 
had  gotten  beyond  control.     It  had  run  the  natural  course 


THE  STRUGGLE  OF  THE  NATIONS  85 

of  all  collectivist  movements,  though  more  rapidly  than 
might  have  been  expected,  and  the  universal  breakdown  of 
industry  killed  all  hope  of  getting  food  or  other  suppHes 
from  Russia.  The  danger  now  was  that  this  movement 
might  spread  to  Germany  itself,  and  the  only  hope  of  victory 
and  safety  lay  in  a  very  quick  and  complete  success. 

The  attempt  at  a  military  success  in  the  west  was  accord- 
ingly made  in  the  early  spring  of  191 8.  Its  initial  gains 
forced  America  to  send  men  over  in  numbers,  and  so  merely 
hastened  the  end.  A  final  German  effort  in  July  failed 
to  gain  ground,  and  from  then  on  the  record  was  merely 
one  of  continuous  and  increasing  gains  by  the  Allies,  until 
the  German  lines  rested  close  to  their  own  frontier. 
Hastened  apparently  by  the  fear  that  the  German  territory 
would  be  subjected  to  the  ravages  of  war,  as  had  been  that 
of  Belgium  and  northern  France,  an  armistice  was  asked  — 
and  granted  by  a  world  too  weary  of  war  to  be  desirous  of 
continuing  even  a  just  war  one  day  longer  than  was  neces- 
sary. 

Industrial  and  political  consequences.  So  far  as  the 
future  of  industriahsm  and  of  world  competition  are  con- 
cerned, the  war  just  finished  has  had  very  important  con- 
sequences. Some  of  these  seem  to  be  commonly  overlooked, 
as  when  we  talk  about  the  reestablishment  of  Germany 
and  Russia  in  terms  which  might  perhaps  have  been  justi- 
fied in  19 16,  but  which  are  no  longer  based  on  actual  con- 
ditions. 

So  far  as  Germany  is  concerned,  for  example,  we  must 
bear  in  mind  that  she  has  lost  practically  all  of  her  cheap 
sources  of  iron  ore,  and  a  very  respectable  fraction  of  her 
coal  reserves,  while  another  large  coal  field  is  at  least  tem- 
porarily alienated.  France,  on  the  other  hand,  has  now 
certain  possibilities,  given  even  fairly  sane  government  ac- 
tion, in  the  line  of  becoming  one  of  the  great  world  com- 
petitors in  heavy  products. 


86  COAL,  IRON  AND  WAR 

Meantime  Japan  has  somewhat  strengthened  her  posi- 
tion as  regards  coal  reserves,  while  another  of  the  Allies 
has  quietly  absorbed  one  of  the  great  petroleum  supplies  of 
the  world.  Russia,  on  the  other  hand  has  lost  ground, 
both  through  internal  and  external  troubles,  and  seems  even 
less  likely  than  before  the  World  War  to  become  one  of  the 
great  manufacturing  countries  of  the  future. 

In  the  light  of  these  facts  we  must  to  some  extent  revise 
our  previous  ideas  as  to  the  relative  present  and  future 
importance,  both  industrially  and  politically,  of  many 
countries.  These  matters  will  be  discussed  in  more  detail 
at  a  later  stage  of  this  study,  when  we  come  to  the  question 
of  the  probable  future  of  industrialism  and  of  world  com- 
petition. 


CHAPTER  VII 
THE  CAUSES  AND  EFFECTS  OF  INDUSTRIALISM 

In  the  preceding  chapters  the  history  of  modern  indus- 
trial growth  has  been  followed  in  each  of  the  leading  indus- 
trial countries  from  its  beginnings  to  the  present  day.  But 
if  this  historical  sketch  is  to  be  more  than  a  mere  record 
of  accomplished  fact,  it  must  have  yielded  suggestions,  at 
least,  as  to  some  of  the  more  general  features  connected 
with  this  industrial  growth.  The  only  value  of  historical 
study  in  any  line,  whether  political  or  industrial,  is  as  it 
throws  light  on  the  conditions  of  the  present,  or  offers  aid  in 
meeting  the  problems  of  the  future.  With  this  in  mind, 
it  will  be  well  to  go  over  the  story  of  the  great  development, 
as  it  took  shape  in  different  countries,  and  to  group  and 
summarize  the  more  general  features  that  seem  to  have  been 
brought  out  in  the  course  of  the  study. 

When  this  is  done,  starting  without  any  preconceived 
ideas  as  to  the  causes,  the  trend  and  the  effects  of  the  new 
industrialism,  the  following  facts  seem  to  have  been  of  such 
general  importance  as  to  justify  further  consideration: 

1.  The  change  from  old  to  modern  forms  of  industrial- 
ism was  in  large  part  a  natural  evolution,  and  relatively 
slow.  But  at  certain  periods  the  rate  of  change  became 
so  rapid  that  the  term  Industrial  Revolution  seems  justified. 

2.  The  Industrial  Revolution  did  not  take  place  at  the 
same  time  in  all  countries,  and  has  not  taken  place  yet  in 
some  countries.  In  Great  Britain  it  arrived  some  forty 
years  before  reaching  the  United  States,  and  sixty  years 
before  it  affected  Germany. 

3.  The  rate  of  growth  has  not  been  uniform  throughout 
the  world,  but  is  affected  in  large  part  by  purely  local  con- 
ditions as  to  population,  supplies,  and  markets. 

87 


88  COAL,  IRON  AND  WAR 

4.  The  growth  is  not  steady  and  continuous,  but  very 
irregular.  It  progresses  by  periods  of  world-wide  indus- 
trial activity,  followed  by  periods  of  depression.  Among 
the  broader  causes  which  seem  to  have  incited  or  aided 
the  periods  of  general  activity  have  been  mentioned,  at 
various  points,  such  matters  as  extension  of  markets  through 
new  developments,  improvement  of  transport,  and  increase 
of  gold  supply. 

5.  World-wide  activity  or  depression  are  accentuated  or 
produced  by  local  conditions,  and  often  by  legislative  or 
political  factors  such  as  differing  attitudes  toward  tariffs, 
currency,  and  restraint  of  trade.  The  human  factor  there- 
fore enters  into  the  question,  but  it  is  generally  subordinate 
in  its  effects  to  the  more  continuously  operative  natural 
influences. 

6.  During  the  growth  of  industrialism  there  are  certain 
general  tendencies  manifested  in  all  countries  with  regard 
to  the  form  and  structure  of  the  industrial  organism  —  its 
increase  in  size  of  unit,  geographic  expansion,  integration 
of  the  industry,  etc.  Such  tendencies,  however,  are  greatly 
influenced  by  purely  legislative  and  political  factors. 

7.  Technical  progress,  like  progress  in  output,  seems  to 
be  rhythmic,  showing  periods  of  large  advance  followed  by 
periods  of  little  progress.  To  some  extent  it  may  be  en- 
couraged or  discouraged  by  intentional  human  effort. 

8.  Industrial  growth  has  had,  as  incidental  effects,  in- 
crease of  population,  formation  of  great  working  centers, 
wide  fluctuation  in  prices,  and  great  changes  in  labor  con- 
ditions. 

9.  Internationally  considered,  the  modern  type  of  indus- 
trialism offers  increasing  opportunities  for  friction,  with 
regard  to  such  matters  as  tariffs,  raw  material  supplies, 
colonial  expansion,  and  immigration. 

10.  Industrialism  has  not,  however,  increased  the  fre- 
quency of  war,  and  it  has  not  directly  caused  any  modern 
war.     But  it  has  operated  to  broaden  the  field  of  strife, 


CAUSES  AND  EFFECTS  OF  INDUSTRIALISM       89 

once  a  war  is  commenced,  to  profoundly  alter  the  methods 
and  practice  of  war,  and  to  increase  the  material  and  other 
damage  caused  by  war. 

II.  The  future  of  industrialism,  both  in  its  internal  and 
Its  international  aspects,  is  in  part  limited  or  fixed  by  natural 
factors  which  can  now  be  stated  with  some  approach  to 
exactness  and  over  which  we  have  little  control.  But  it  is 
also  subject  to  the  action  of  purely  human  factors,  and  is 
to  that  extent  within  our  control.  The  question  of  future 
growth,  and  of  future  peace,  both  within  the  nation  and 
between  the  nations,  depends  very  largely  upon  the  manner 
in  which  that  control  is  applied. 

The  preceding  statements  are  made,  not  as  having  been 
definitely  proven  by  our  study  of  the  historic  growth  of  in- 
dustrialism, but  as  having  been  at  least  suggested  by  that 
study.  They  raise,  it  will  be  seen,  questions  which  demand 
more  detailed  examination,  in  the  hope  that  we  can  reach 
conclusions  regarding  some  of  them  at  least  —  conclusions 
which  will  be  both  more  definite  in  form  and  of  broad 
general  validity.  These  matters  which  relate  to  the  causes, 
the  effects  and  the  future  of  industrialism  will  accordingly 
be  discussed,  in  the  remainder  of  this  volume,  in  the  follow- 
ing order: 

Part  II.  The  Material  Bases  of  Industrial 
Growth. 

Part  III.  The  Causes  and  Effects  of  Growth. 

Part  IV.  The  Future  of  Industrialism. 


PART  II 

THE  MATERIAL  BASES  OF  INDUSTRIAL 
GROWTH 


CHAPTER  VIII 
THE  MATERIAL  BASES  OF  CIVILIZATION 

In  the  preceding  section  the  history  of  industrial  growth 
has  been  briefly  discussed,  in  each  of  the  leading  industrial 
nations,  up  to  the  time  when  the  World  War  forced  large 
readjustments  in  competitive  conditions.  The  development 
of  industrialism  was,  however,  treated  merely  from  its  ex- 
ternal aspects,  without  attempting  to  more  than  suggest 
the  material  and  human  bases  on  which  such  development 
depended.  It  will  therefore  be  profitable  to  turn  to  this 
side  of  the  subject,  and  endeavor  to  get  some  more  definite 
idea  of  the  factors  which  condition  the  growth  of  modern 
industrialism,  and  which  tend  to  determine  the  possibility 
of  its  existence,  the  rate  of  its  growth,  and  the  extent  to 
which  such  growth  can  be  carried,  in  different  countries. 
These  last  three  words  are  important,  for  it  will  be  seen 
later  that  not  all  countries  are  susceptible  to  the  develop- 
ment of  a  machine  civilization  of  the  type  to  which  we  have 
become  accustomed  here  and  in  western  Europe. 

It  has  been  seen  that  during  the  past  century  and  a  half 
there  has  been  a  great  change  in  the  character  of  the  world's 
industrial  activities,  a  change  which  in  some  countries  has 
been  so  marked,  and  so  rapidly  accomplished,  as  to  fairly 
merit  the  term  Industrial  Revolution.  This  change  has  not 
only  effected  a  large  increase  in  the  production  of  commod- 
ities, and  in  the  average  wealth  and  standard  of  living  of 
the  inhabitants  of  industrial  countries,  but  it  has  affected 
the  structure  of  industry  itself.  In  doing  this  it  has  gradu- 
ally done  away  with  an  older  system  of  small-scale  pro- 
duction, where  an  individual  or  a  small  group  of  laborers 
produced  commodities  by  hand,  and  replaced  it  by  a  system 
of  large-scale  production,  where  large  groups  of  laborers 

93 


94  COAL,  IRON  AND  WAR 

produce  commodities  by  machinery.  The  introduction  of 
machinery  was,  indeed,  so  characteristic  a  feature  of  the  new 
industriaHsm  as  to  induce  a  French  writer  ^  to  coin  the  word 
machinofactuvCy  to  distinguish  the  new  industrial  period 
from  the  older  time  of  manufacture.  And  it  is  a  favorite 
rhetorical  trick  of  writers  and  orators  of  the  more  radical 
groups,  protesting  against  what  they  consider  the  exploita- 
tion of  the  wage-slave  by  the  new  industrialism,  to  speak  of 
our  present  machine  civilization.  This  latter  term  is  really 
very  good,  and  can  be  adopted  without  hesitation.  There 
is  not  the  shghtest  reason  in  the  world  for  us  to  feel  ashamed 
of  the  fact  that  to-day  machinery  is  doing  hard  and  difficult 
and  dangerous  work  which  would  otherwise  have  to  be  done 
by  men. 

We  may  therefore  accept  the  fact  that  to-day  we  are 
living  in  a  Machine  Civilization,  as  compared  to  the  Hand 
Civilization  of  earlier  periods.  It  is  the  general  introduc- 
tion of  machinery,  into  a  very  large  and  increasing  number 
of  industries  and  human  activities,  which  has  made  possible 
the  type  of  civilization  with  which  we  are  now  best  ac- 
quainted. The  machine  has  not  only  made  it  possible  to 
produce  commodities  in  large  quantities,  but  it  has  tended 
to  reduce  the  cost,  per  unit,  of  making  these  commodities. 
These  two  effects,  taken  together,  have  increased  the 
wealth  of  the  world  per  capita,  and  along  with  this,  pro- 
ceeding from  equally  natural  causes,  there  has  come  about 
a  more  equal  distribution  of  this  wealth,  with  a  higher  wage 
standard  and  a  higher  average  standard  of  Hving.  Modern 
industrialism  has  not  remade  man;  it  has  not  changed  his 
intellect  or  his  heart,  but  it  has  offered  him  greater  safety 
and  comfort  in  his  life,  and  wider  opportunities  for  develop- 
ment. 

Along  with  these  advances  in  sheer  creature  comfort, 
there  have  come  others  in  higher  lines,  which  can  be  attrib- 
uted in  part  at  least  to  industrial  progress.     Science  has 

»Bollet,  D.,  "L'evolution  cJe  I'lndustrie."    Paris,  1914, 


THE  MATERIAL  BASES  OF  CIVILIZATION        95 

gone  hand  In  hand  with  industry;  its  theories  have  now  op- 
portunity for  immediate  application;  and  in  partial  repay- 
ment of  this  aid,  industrialism  offers  science  new  and  better 
tools  with  which  to  work,  and  broader  opportunity  for  ex- 
periment and  observation.  As  science  becomes  increasingly 
exact  and  quantitative,  both  in  its  observations  and  in  its 
deductions,  its  dependence  on  industry  and  its  aids  to  indus- 
try become  increasingly  close  and  important. 

In  following  out  this  line  of  thought  we  have  not,  in 
reality,  strayed  away  from  our  immediate  subject  as  far  as 
might  seem,  for  when  we  come  to  examine  closely  that  sub- 
ject —  the  material  bases  of  modern  civilization  —  we  will 
find  that  it  is  thanks  to  modern  scientific  development  that 
we  can  offer  at  least  approximately  precise  answers  to  the 
chief  questions  which  present  themselves.  If  it  had  not 
been  for  the  wonderful  advances  made  by  such  sciences  as 
geology  and  chemistry  during  the  past  century  we  should  be 
entirely  unable  to  form  any  definite  ideas  as  to  the  real 
extent  of  our  chief  material  resources,  or  as  to  their  prob- 
able duration.  And  these  two  matters  are,  in  all  truth,  the 
chief  factors  which  will  tend  to  ^x  the  direction,  and  in  the 
long  run  to  limit  the  growth,  of  our  present  type  of  Machine 
Civilization. 

We  are  interested  In  the  effects  of  modern  industrialism 
on  the  lives  and  fortunes  of  the  peoples,  in  war  and  in  peace.  > 
Now,  when  we  come  to  examine  the  bases  on  which  t4»«  / 
modern  type  of  civilization  rests,  it  is  seen  that  the  story 
of  industrial  growth  and  competition  since  1775  or  there- 
about is  chiefly  though  not  entirely  the  story  of  coal  and 
iron.  It  is  true  that  political  and  economic  growth  and 
predominance  were  not  always  expressed  in  terms  of  coal 
and  iron  tonnage;  it  is  equally  true  that  in  the  future  they 
may  again  be  expressed  otherwise.  The  facts  as  to  the 
remoter  past  and  the  possibUIties  as  to  the  more  distant 
future  can  serviceably  be  stated  and  suggested  in  the  later 
course  of  the  present  discussion.     But  for  the  most  part,  as 


96  COAL,  IRON  AND  WAR 

dealing  with  the  recent  past,  the  present  and  the  immediate 
future,  we  must  still  lay  greater  stress  upon  the  two  ma- 
terial factors  which  are  now  the  things  of  chief  importance 
—  and  these  are  the  existence,  and  the  unequal  distribution 
over  the  earth,  of  vast  supplies  of  coal  and  iron  ore. 

These  two  factors  have  not  only  made  modern  indus- 
trialism possible,  by  affording  supplies  to  its  machinery  — 
fuel  to  its  engines  and  metal  with  which  to  construct  both 
the  engines  and  the  tools  —  but  they  have  also  tended  to 
concentrate  industrial  development  in  certain  more  favored 
regions.  In  so  doing  they  have  repeatedly  changed  the 
balance  of  power  throughout  the  world,  and  their  effects  in 
this  direction  are,  as  we  will  see  later,  not  yet  finished. 
There  have  always  been  differences  in  the  size  and  popula- 
tion and  strength  of  nations,  but  these  differences  have  been 
accentuated  by  modern  industrialism,  and  they  are  now 
very  definitely  related  to  certain  natural  and  material  causes.J 
Study  of  these  matters  goes  far  toward  explaining  our  recent 
and  current  economic  and  international  history,  but  it  also 
aids  us  in  forming  some  idea  as  to  the  future  course  of 
events  both  within  the  nation  and  between  the  nations. 

This  recognition  of  the  basal  importance  of  coal  and  ore 
supplies  does  not,  however,  mean  that  attention  must  be 
limited  to  their  consideration,  exclusive  of  other  factors  in 
the  problem.  We  can  not  get  very  far  by  study  of  a  single 
industry,  no  matter  how  important  that  industry  may  be, 
and  it  will  be  found  when  industrial  development  is 
examined  critically  that  many  other  factors  share  in  bring- 
ing about  the  final  result.  These  factors  are  of  various 
types:  they  include  obviously  such  matters  as  changes  in 
population,  both  as  affecting  manufacturing  ability  and 
markets,  increase  in  the  food  supply,  the  increased  or  de- 
creased production  of  the  precious  metals,  and  others  of 
less  broad  importance.  But  in  addition  to  these  we  must 
also  recognize  that  there  are  certain  other  factors,  of  widely 
different  type,  which  have  operated  to  incite  or  aid  or  limit 


THE  MATERIAL  BASES  OF  CIVILIZATION        97 

industrial  development  at  different  times  and  in  different 
countries.  Among  these  we  may  profitably  refer  to  the 
progress  of  science,  of  invention,  and  of  geographic  dis- 
covery, all  of  which  have  certain  effects  on  industrial  pro- 
gress. 

In  later  sections  the  factors  last  noted  will  be  taken  up 
in  some  detail,  but  at  present  attention  will  be  confined  to 
consideration  of  the  chief  material  factors  which  have  in- 
fluenced the  course  of  modern  civilization,  as  expressed  in 
industrial  development.  The  most  important  of  these  are, 
of  course,  coal  and  iron  ore;  but  there  are  a  number  of 
other  raw  materials  which  are  not  of  such  direct  primary 
importance,  but  which  serve  as  the  bases  of  various  in- 
dustries.    These  will  be  discussed  in  turn. 

Regarding  all  these  material  supplies,  we  are  interested 
in  several  phases  of  the  subject.  At  the  outset,  some  idea 
must  be  gained  as  to  the  known  existing  reserves  of  these 
raw  materials,  and  as  to  the  probability  that  these  reserves 
will  or  will  not  be  increased  by  further  discoveries.  This 
naturally  brings  up  the  question  as  to  the  rate  at  which  we 
are  now  using  up  these  resources,  the  probability  as  to  future 
changes  in  this  rate  of  exhaustion,  and  consequently  the  prob- 
able duration  of  our  supplies.  But  now  another  point  of  in- 
terest is  suggested,  for  in  the  course  of  our  study  we  will 
have  found  that  the  known  supplies  are  not  distributed 
evenly  over  the  earth,  but  are  on  the  contrary  very  much  lo- 
calized, so  that  certain  countries  or  parts  of  countries  will 
have  large  coal  and  iron  resources  while  others  will  have 
little  or  nothing.  This  leads  us  to  consider  the  effects  which 
such  localization  of  our  chief  resources  has  had  upon  the 
industrial  growth  of  different  countries,  and  as  to  the  way 
in  which  it  will  affect  the  world  competition  of  the  future, 
whether  that  competition  be  commercial  or  military. 
Finally,  recurring  to  purely  domestic  matters,  we  come  to  a 
question  which  in  the  United  States  as  abroad  is  likely  to 
be  one  of  the  important  political  problems  of  the  immediate 


98  COAL,  IRON  AND  WAR 

future.  It  Involves  consideration  of  the  manner  in  which 
the  great  mineral  resources  are  now  owned  and  operated, 
and  of  the  question  of  state  ownership  or  "  nationalization  " 
of  such  resources. 

It  will  be  seen  that  the  field  of  study,  even  if  we  limit 
it  more  or  less  definitely  to  coal  and  iron,  is  still  broad 
enough;  and  that  unless  we  can  manage  to  subdivide  it,  and 
keep  discussion  within  the  boundaries  so  established,  there 
will  be  great  danger  of  becoming  lost  in  a  hopeless  maze 
of  facts  and  theories.  So,  to  lessen  this  danger,  the  chap- 
ters which  immediately  follow  —  that  is  to  say,  the  remain- 
ing chapters  of  Part  II  —  will  be  devoted  to  consideration 
of  the  known  resources  of  coal,  iron  ore,  and  other  rav/ 
material  supplies;  and  of  the  probable  duration  of  these 
supplies,  considered  en  masse.  The  questions,  international 
in  character,  which  arise  from  the  localization  of  the  great 
resources,  and  their  effects  on  world  competition  and  war, 
will  be  discussed  in  a  later  section  (Part  IV) . 

For  the  sake  of  clearness,  it  may  be  well  to  note  that  the 
subjects  treated  in  the  present  section  will  be  taken  up  in 
the  following  order: 

Chapter  IX.     The  Coal  Resources  of  the  World. 

Chapter  X.     Petroleum,  Gas  and  Water  Power. 

Chapter  XI.     Iron  Ore  Reserves  of  the  World. 

Chapter  XII.     The  Supply  of  the  Precious  Metals. 

Chapter  XIII.     The  Minor  Commercial  Metals. 

Chapter  XIV.     Chemical  and  Structural  Materials. 


s3' 


^-^  CHAPTER  IX 

THE  COAL  RESOURCES  OF  THE  WORLD 

Coal,  as  the  principal  material  factor  in  industrial  de- 
velopment, affects  both  industrial  and  social  progress  in 
numerous  and  often  complex  ways.  Its  effects  upon  the 
early  history  of  modern  industrialism  have  been  referred  to 
briefly  in  previous  chapters,  but  it  will  now  be  necessary  to 
examine  its  economic  relations  more  closely,  before  going 
on  to  the  questions  of  the  extent  and  duration  of  our  coal 
supplies.  Only  if  we  understand  clearly  just  how  far-reach- 
ing are  the  effects  of  cheap  coal  supplies  can  we  appreciate 
how  great  are  the  effects  of  the  geographic  localization  of 
such  supplies,  and  how  revolutionary  would  be  the  effects  of 
their  exhaustion. 

The  uses  of  coal.  Of  a  given  quantity  of  coal  in  the 
ground,  a  very  large  proportion,  ranging  from  a  quarter  at 
the  best  to  a  half  at  the. worst,  will  be  left  as  pillars,  or 
otherwise  lost  or  wasted  during  mining  operations.  This 
fact  must  be  borne  In  mind  when  consideration  Is  given  to 
the  exhaustion  of  coal  supplies. 

Of  the  remaining  coal,  which  is  actually  extracted,  a  cer- 
tain proportion  also  fails  to  reach  the  market,  being  em- 
ployed In  running  engines  for  pumping,  hoisting,  etc.,  at  the 
mines  themselves.  This  proportion  may  amount  to  five 
per  cent,  of  the  total  coal  extracted.  The  remainder  is 
now  left  as  marketable,  in  one  form  or  another,  and  for 
one  of  many  uses.  The  quantity  of  marketable  coal  thus 
amounts  to  from  45  to  70  per  cent,  of  the  total  coal  that 
was  originally  In  the  ground.  As  a  fair  average,  taking  In 
all  kinds  of  mines  and  all  types  of  coal,  it  may  be  assumed 
that  about  two-thirds  of  the  total  coal  in  the  ground  finally 
reaches  a  merchant  use.  We  are  now  concerned  with  the 
destination  of  this  two-thirds. 

99 


loo  COAL,  IRON  AND  WAR 

(  The  largest  uses,  in  most  coal  producing  countries,  are 
for  power  in  manufacturing  plants,  for  heating  houses  and 
other  buildings,  and  for  locomotive  service.  Next  to  these 
in  importance  come  the  utilization  of  coal  for  steamer  fuel, 
as  blast  furnace  fuel  (in  the  form  of  coke),  and  as  a  raw 
material  itself  in  the  manufacture  of  illuminating  gas  and 
by-products.  In  considering  any  given  country  we  would 
have  of  course  another  and  in  some  cases  very  important 
disposition  made  of  part  of  its  coal  output  —  i.e.,  by  export- 
ing it  to  another  country.  But  since  the  coal  so  exported 
is  finally  utilized  somewhere  in  one  of  the  ways  previously 
noted,  the  export  of  coal  can  not  be  considered  as  a  separate 
mode  of  coal  utilization,  but  merely  as  one  mode  in  which 
the  coal  output  of  some  given  country  is  marketed. 

With  these  facts  as  a  basis,  we  may  say  that  coal  appears 

ras  a  factor  in  the  world's  industrial  and  commercial  struc- 
ture in  the  following  principal  ways : 

1.  As   a    fuel   used   to   develop   power   for   domestic 

manufactures. 

2.  As  a  fuel  used  to  develop  power  for  domestic  trans- 

port. 

3.  As  a  raw  material,  used  in  manufactures. 

4.  As  an  export  commodity,  and  as  the  fuel  used  in 
''V  export   trade. 

Used  in  any  of  the  ways  noted  above,  coal  produces 
powerful  effects  upon  the  industrial  and  commercial  rela- 
tions of  the  producing  country,  and  these  effects  are  so  dif- 
ferent and  so  far-reaching  that  it  will  pay  to  consider  separ- 
ately, though  briefly,  the  different  modes  of  utiUzing  and 
marketing  the  coal  supply. 

Coal  as  fuel.  A  large  proportion  of  the  coal  used  in  the 
world  is  utilized  for  the  purpose  of  developing  power  for 
running  manufacturing  plants.  Whether  the  coal  is  used 
raw,  or  in  the  form  of  producer-gas;  whether  the  steam 
power  developed  is  used  direct,  or  after  conversion  into 


THE  COAL  RESOURCES  0ir  THE  WOSlLD      loi 

electric  power  —  these   do  not  afiesi  \  the^  ^w^^iri  :  questiorij,^'^ 

At  the  time  of  the  Industrial  Revolution  in  England,  this 
use  of  coal  as  a  fuel  for  manufactures  was  looked  upon  as 
its  chief  future  utilization,  and  it  is  still  an  important  use,  ' 
and  one  which  affects  directly  the  general  manufacturing 
standing  of  the  country.  It  is  still  the  chief  and  most  im- 
portant utilization,  though  we  have  come  to  use  larger  and 
larger  quantities  of  coal  each  year  for  the  simple  purpose 
of  transporting  commodities  and  people. 

One  factor  which  is  often  overlooked,  but  which  has  an 
immense  industrial  and  social  effect,  is  the  aid  given  by 
cheap  coal  to  the  development  of  transport  within  the  pro- 
ducing country  itself.  Use  of  coal  for  this  purpose  has 
been  a  leading  utilization  of  coal  for  many  years  in  the 
United  States,  and  despite  the  increased  use  of  petroleum 
and  electric  power  for  transportation  purposes,  the  same 
fraction  of  our  coal  supply  is  likely  to  be  devoted  in  future 
to  the  same  end. 

In  its  effects  on  manufacturing,  through  giving  cheap 
modes  of  transport,  coal  is  little  if  any  less  important  than 
in  its  direct  use  as  a  manufacturing  fuel.  For  the  United 
States  indeed,  with  the  vast  distances  which  we  have  al- 
ways to  consider  in  producing  and  marketing  a  product,  the 
transport  use  of  coal  is  one  of  very  serious  bearing  on  our 
industrial  situation.  *^ 

Coal  as  a  raw  material.  When  coal,  particularly  a 
bituminous  coal,  is  heated  strongly  out  of  contact  with  air  it 
is  not  burnt,  but  distilled,  and  in  the  process  of  this  dis- 
tillation several  groups  of  products  are  formed.  The  fixed 
carbon  and  ash  which  were  in  the  original  coal  remain,  of  - 
course,  in  the  form  of  coke ;  but  in  addition  the  more  volatile 
constituents  of  the  coal  separate  out  in  the  forms  respect- 
ively of  gas,  ammoniacal  liquor,  and  coal  tar.  Of  the  four 
classes  of  product  made  by  distilling  coal  there  are  three  — 
coke,  gas  and  coal-tar  —  of  great  individual  importance, 
and  at  various  times  and  various  places  each  of  them  has 


102  GOAL,  IRON  AND  WAR 

been  the  pftyur.t.mc-st. desired.  This  fact  serves  to  com- 
plicate the  commercial  questions  involved,  for  of  course 
we  can  look  at  the  matter  from  each  of  these  separate  view- 
points. To  the  manufacturer  of  illuminating  gas,  the  coke, 
tar,  etc.,  are  all  by-products,  and  the  gas  is  the  main  pro- 
duct. To  the  iron  industry,  the  coke  is  the  main  product, 
and  the  others  were,  until  quite  recently,  wasted.  In  the 
future  it  is  possible  enough  that  the  coal-tar  will  be  the 
main  product,  and  that  the  gas  and  coke  incidentally  pro- 
duced will  be  looked  on  as  the  real  by-products. 

Historicallyj^coke  was_jJi£  first  coal-product  to  be  made; 
after^thi^came  illuminating__gas :  finally  cani£Ljdie-cx;xaI>tar 
^envatiyes, — As  has  been  noted  in  an  earlier  chapter,  coke 
for  furnace  use  was  first  made  in  the  seventeenth  century, 
and  was  widely  adopted  in  England  in  the  eighteenth.  Illu- 
minating gas,  on  the  other  hand,  was  not  made  for  use 
until  1798,  when  the  first  private  gasworks  was  constructed 
for  an  English  factory.  Public  gas  works  came  a  little 
later,  from  London  in  1813,  to  Paris  18 15  and  Berlin  1826. 
During  the  first  half  of  the  nineteenth  century  the  use  of 
blast  furnace  coke  grew  rapidly,  as  did  the  manufacture  and 
use  of  illuminating  gas;  but  in  both  the  coke  ovens  and  the 
gasworks  the  coal  tar  was  practically  wasted.  It  was  not 
until  1856,  when  Perkin  discovered  the  aniline  colors  which 
could  be  produced  from  coal  tar,  that  any  serious  attempt 
was  made  to  utilize  this  product,  though  small  quantities 
had  been  treated  previously  in  order  to  make  benzene  and 
illuminating  oils,  from  which  latter  practice  arose  the 
term  "  coal-oil  "  so  frequently  still  applied  to  kerosene  in 
certain  parts  of  the  country. 

The  manufacture  of  aniline  dyes  and  other  coal-tar  pro- 
ducts spread  rapidly,  Germany  soon  taking  the  lead  in  this 
line  of  activity.  In  the  United  States,  until  the  war  cut 
off  the  foreign  supply,  little  was  done  in  this  direction. 
The  first  American  by  product  coke  ovens  were  erected  in 
1892,  and  their  use  extended  rapidly,  so  that  in  19 13  over 


THE  COAL  RESOURCES  OF  THE  WORLD      103 

one-quarter  of  our  total  coke  supply  was  produced  in  by- 
product, as  distinct  from  bee-hive  ovens.  But  the  chief  by- 
products, so  far  as  value  were  concerned,  were  still  the  am- 
monia and  the  gas.  It  will  be  of  interest  to  note  that  in 
the  year  preceding  the  war  some  twelve  million  tons  of  coke 
were  produced  here  in  by-product  ovens;  and  that  the  total 
by-product  values  were  respectively  six  million  dollars  worth 
of  gas,  almost  eight  million  dollars  in  ammonia  products, 
and  less  than  three  million  dollars  in  coal-tar. 

Relative  importance  of  uses.  The  data  do  not  exist  for 
giving  an  exact  statement  as  to  the  relative  amounts  of  coal 
used  for  different  purposes,  but  we  do  have  figures  for  the 
uses  in  the  United  States  during  recent  years,  broadly 
grouped;  and  with  these  as  a  basis  we  may  get  a  sufficiently 
accurate  idea  as  to  world  conditions. 

Taking  a  year  before  the  United  States  had  entered  the 
war,  and  in  which  industrial  conditions  were  not  far  from 
normal,  the  figures  given  by  the  United  States  Geological 
Survey  for  anthracite  and  bituminous  utilizations  during 
19 1 5  are  as  follows,  when  reduced  to  metric  tons: 

Metric  tons       Per  cent,  of  total 

Coal  used  at  mines  for  pumping,  etc. . .    18,000,000  3.9 

for  locomotive  fuel 1 18,600,000  25.6 

for  manufacturing   power    ..147,900,000  31.5 

for  heating  buildings   110,300,000  23.8 

for  making  coke   56,200,000  12.1 

for  illuminating  gas 4,200,000  0.9 

for  steamer  fuel   9,800,000  2.2 

Total 463,000,000  100.0 

The  figures  above  given  may  now  be  used  in  relation  to 
the  world  output  of  coal,  which  during  the  last  year  of 
great  production  (19 13)  amounted  to  about  1,344,000,000 
metric  tons.  As  further  bases  we  have  the  facts  that  Amer- 
ica had  at  that  time  about  one-fifth  of  the  world's  steam 


I04  COAL,  IRON  AND  WAR 

shipping  tonnage ;  almost  two-fifths  of  the  railway  mileage ; 
the  same  proportion  of  pig-iron  output;  and  certain  rather 
well  known  habits  as  to  over-heating  houses  and  over-push- 
ing engines  and  furnaces. 

Making  rough  allowances  for  the  factors  above  named, 
we  get  results  about  as  follows,  for  the  uses  to  which  the 
world  puts  its  coal,  excluding  the  portion  used  at  the  mines; 

Per  cent. 

Manufacturing  purposes 562,000,000  43 

Heating   buildings 250,000,000  20 

Locomotive   fuel 230,000,000  18 

Coke 150,000,000  12 

Steamer   fuel 75,000,000  6 

Illuminating  gas 12,000,000  1 


1,279,000,000  100 

The  results  are  not  of  course  precise,  but  so  far  as 
known  no  previous  estimate  of  this  sort  has  been  made,  so 
that  they  will  have  to  be  accepted  temporarily.  They  indi- 
cate that  a  little  over  half  our  coal  supply  goes  to  the  making 
of  new  commodities,  and  about  a  quarter  to  the  task  of 
transporting  these  commodities  to  market;  while  the  re- 
maining quarter  is  utilized  for  human  comfort  directly. 

Coal  as  an  export  commodity.  Countries  or  regions 
which  have  a  coal-output  in  excess  of  that  currently  needed 
for  local  uses  can  of  course  export  coal,  like  any  other  com- 
modity, provided  they  can  reach  a  market  profitably.  If 
their  own  supplies  are  dear,  because  of  mining  costs  or 
transportation  difficulties,  their  export  trade  in  coal  will 
be  small  or  entirely  lacking.  But  if  the  local  coal  is  cheaply 
mined,  and  especially  if  the  mines  are  near  the  seaboard  so 
that  transportation  to  ports  is  cheap,  then  the  export  trade 
in  coal  may  attain  very  great  dimensions.  The  country 
most  favored  in  this  regard  has  been  Great  Britain  where 
both  the  necessary  conditions  have  obtained,    \ 


THE  COAL  RESOURCES  OF  THE  WORLD       105 

Now,  if  we  look  upon  the  export  trade  in  coal  simply 
as  a  means  of  exchanging  a  commodity  for  money,  it  is  one 
of  the  worst  possible  trades  that  a  country  can  enter  upon. 
It  does  not  bring  in  any  remarkable  total  profit,  or  profit 
per  ton.  Furthermore,  and  this  is  of  more  importance; 
we  are  seUing  a  commodity  than  can  not  be  replaced,  but  on 
the  contrary  grows  naturally  scarcer  each  year,  so  that  in 
the  long  run  our  own  manufacturers  will  have  to  pay, 
dearly  enough,  for  every  cent  that  has  been  made  out  of 
the  coal  export  trade.  A  nation  which  exports  coal  is  not 
really  selling  anything;  it  is  draining  itself  of  its  life-blood. 

Looked  upon  solely  as  a  merchantable  commodity,  coal 
is  therefor  the  most  expensive  thing  we  could  possibly 
export,  except  men.  But  there  are  certain  collateral  ad- 
vantages connected  with  the  export  of  coal,  which  go 
far  toward  counter-balancing  the  great  disadvantage.  In 
the  long  run  they  fail  to  do  it,  but  they  are  so  impressive 
that  they  cover  up  the  loss  for  a  long  time,  and  give  an 
appearance  of  great  prosperity  and  wealth,  so  long  as  the 
supply  of  cheap  coal  lasts.  When  it  fails,  or  when  some 
competitive  nation  develops  still  cheaper  coal,  the  realities 
of  the  case  stand  out  sharply.  An  export  trade  in  coal 
which  is  carried  to  such  a  point  as  to  make  serious  inroads 
on  the  supply  is  not  a  sound  commercial  or  political  pro- 
position. 

As  for  the  counterbalancing  advantages,  they  arise 
through  the  use  of  coal  as  a  transport  fuel,  and  they  operate 
in  very  broad  fashion.  For  example,  if  a  certain  tonnage 
of  coal  be  shipped  abroad,  another  small  but  still  consider- 
able tonnage  will  be  used  to  take  that  same  ship  out  and 
bring  her  home.  But  she  will  not  come  home  light,  but 
laden  with  foreign  products.  A  coal  shipment  therefore 
brings  about  not  only  further  use  of  coal,  but  increased 
foreign  trade.  In  a  country  whose  manufactures  have  over- 
run her  agriculture,  coal  exports  may  be  an  important  means 
of  paying  for  and  bringing  home  foreign  food  supplies. 


io6  COAL,  IRON  AND  WAR 

Still  more  important  commercially  and  industrially  are 
the  consequences  which  arise,  not  directly  from  the  export 
trade,  but  indirectly  from  one  of  its  natural  results.  In  a 
country  handling  coal  exports  there  will  be  almost  inevit- 
ably ample  coal  supplies  and  good  bunkering  facilities  at 
its  ports.  There  is  a  direct  inducement  for  shipping,  for- 
eign as  well  as  domestic,  to  make  one  of  the  ports  of  a  coal- 
producing  country  as  an  intermediate  stop  in  a  long  voy- 
age. The  end  result  of  this  process  is  that  the  coal-pro- 
ducing country  is  likely  also  to  become  an  important  re- 
handHng  country,  for  all  sorts  of  foreign  products. 
""^Finally,-  since  cheap  coal  supply  is  an  important  element 
in  cheap  operation  of  shipping,  there  will  be  a  tendency  for 
the  shipping  interests  to  become  domiciled  in  a  great  coal- 
shipping  country.  In  that  way  the  profits  incidental  to  a 
merchant  marine  will  also  come  to  the  coal  country  —  not 
only  these  gained  by  direct  shipping  operations,  as  freights 
and  wages  and  insurance,  but  also  those  derived  from  the 
building  and  sale  of  ships. 

The  total  effects  of  using  coal  as  a  transport  fuel  in  the 
export  trade  are  so  great  that  we  might  fairly  replace  the 
old  and  partly  untrue  saying  that  trade  follows  the  flag,  by 
one  more  wholly  true  —  trade  follows  the  fuel.     \^ 

THE  EXTENT  OF  THE  COAL  SUPPLY 

Coal  is  widely  distributed  throughout  the  world,  and  oc- 
curs in  greater  or  lesser  quantity  on  all  the  continents  and 
in  many  countries.  But,  as  will  be  later  found,  it  is  by  no 
means  evenly  distributed  from  a  geographical  or  national 
standpoint,  and  this  fact  has  had  and  will  have  great 
economic  and  political  effects.   ) 

At  present,  however,  attention  may  be  confined  to  the 
matter  in  its  most  general  form  —  the  total  supplies  of  coal 
which  are  known  to  exist.  On  this  point  we  are  aided  by 
national  fears  and  hopes,  which  have  operated  to  secure  the 


THE  COAL  RESOURCES  OF  THE  WORLD      107 

data  necessary  for  forming  any  sound  conclusions  on  the 
subject.  For  almost  a  century  Great  Britain  has  been 
much  concerned,  at  intervals,  over  the  impending  exhaustion 
of  the  British  coal  supply,  and  a  series  of  royal  commissions 
have  at  various  times  investigated  the  subject,  with  differ- 
ing results.  Later,  as  Germany  began  its.  great  industrial 
expansion,  that  country  was  troubled  in  similar  fashion  re- 
garding its  own  coal  reserves.  Still  more  recently  the 
United  States,  equally  agitated  though  with  far  less  reason, 
exhibited  a  similar  apprehension  concerning  the  extent  and 
the  probable  duration  of  the  American  coal  resources. 

From  our  present  standpoint,  the  immediate  and  very 
useful  consequence  of  those  fears  has  been  that,  for  some 
years  past,  there  have  been  available  very  detailed  data 
concerning  the  coal  resources  of  the  three  great  competi- 
tive industrial  nations  —  the  United  States,  Germany  and 
Great  Britain.  But  with  regard  to  other  countries  the  in- 
formation ha§,  in  general,  been  more  or  less  fragmentary 
and  incomplete.  This  deficiency  in  our  industrial  knowl- 
edge was  the  more  serious  in  so  far  as  it  raised  uncertainties 
concerning  the  exact  coal  situation  in  such  countries  as  China, 
Canada,  Australia,  India  and  South  Africa  —  the  coun- 
tries which  might  be  expected,  on  one  ground  or  another, 
to  furnish  competition  to  our  own  manufactures  when  the 
gradual  exhaustion  of  British  and  German  coal  resources 
begins  to  limit  the  further  growth  of  our  European  com- 
petitors. 

Immediately  before  the  World  War,  however,  these  de- 
ficiencies in  our  knowledge  were  made  up  in  very  generous 
fashion,  for  a  detailed  series  of  reports,  covering  the  coal 
resources  of  almost  every  country  In  the  world,  was  pre- 
pared at  the  instance  of  the  Twelfth  International  Geologi- 
cal Congress  and  pubhshed  in  19 13.  It  was  fortunate  that 
this  great  cooperative  work  was  taken  up  and  finished  at 
that  particular  time,  for  obviously  any  later  discussion  of 
such  matters  as  German  and  Chinese  coal  reserves  would 


io8  COAL,  IRON  AND  WAR 

be  looked  on  with  some  suspicion,  as  possibly  affected  by 
political  considerations. 

The  data  presented  in  these  volumes  will  be  used  as  the 
basis  for  the  further  discussion  of  both  total  and  national 
coal  supplies,  and  except  where  specific  statement  to  the  con- 
trary is  made,  they  will  be  used  exactly  as  published.  Con- 
siderable rearrangement  will,  however,  be  necessary  in 
order  to  suit  our  present  requirements. 

The  world's  total  reserves.  At  the  outset,  in  order  to  get 
a  broad  view  of  the  entire  situation,  it  will  be  well  to  sum- 
marize the  data  given  as  to  the  total  coal  reserves  of  the 
world.  This  is  done  in  the  following  table,  where  the  total 
is  given,  classified  further  by  continents  and  by  kinds  of 
coal. 

Estimated  Coal  Reserves  of  the  World,  in  Millions  of  Tons 

Continent  Anthracite    Bituminous  Lignite  Total 

North   America 21,842  2,239,683  2,811,906  5,073,431 

Asia   407,637  760,098  111,851  1,279,586 

Europe    54,346  693,162  36,682  784,190 

Australasia    659  133,481  36,270  •     170,410 

Africa 11,662  45,123  1,054  57,839 

South   America 700  31,397             32,097 


World  total,  mil- 
lions of  tons. .  .496,846      3,902,944      2,997,763      7,397,553 

The  first  impression  that  will  be  made  by  this  table  is, 
of  course,  that  the  coal  reserves  of  the  world  are  tremen- 
dous, as  compared  with  existing  human  requirements,  and 
that  therefore  the  fear  of  coal  exhaustion  must  be  too  ab- 
surd to  require  any  careful  consideration.  This  viewpoint 
might  be  supported  by  noting  that  in  19 13,  the  year  at 
which  world  coal  output  reached  its  maximum,  the  total 
produced  all  over  the  world  amounted  to  slightly  less  than 
1500  million  tons.  At  this  rate  of  consumption,  large 
though  it  is,  the  coal  supplies  as  above  tabulated  would 


THE  COAL  RESOURCES  OF  THE  WORLD       109 

last  for  some  4500  years.  On  this  basis  there  would 
obviously  be  no  reason  to  give  the  matter  any  serious 
thought. 

The  question  of  exhaustion.  There  are,  however,  two 
very  serious  objections  which  may  be  urged  against  taking 
such  a  very  optimistic  view  of  the  question.  The  first  is, 
that  the  annual  coal  requirements  of  the  civilized  world  are 
increasing  at  a  very  rapid  rate,  and  that  for  a  long  time  to 
come  we  may  fairly  expect  this  increase  in  yearly  output  to 
continue,  even  if  the  rate  of  progress  is  lowered  somewhat. 
We  will  see  later  when  the  rate  of  industrial  progress  is 
under  discussion  (Chapter  XXII),  that  for  sixty  years  or 
so  the  world  has  used  on  an  average,  four  per  cent,  more 
coal  each  year  than  in  the  year  preceding.  This  is  equiva- 
lent to  an  eight-fold  increase  in  a  half-century.  It  im- 
plies that  during  our  next  period  of  industrial  activity  we 
will  rise  far  above  the  record  established  during  19 13.  To 
put  the  matter  more  precisely,  it  is  entirely  probable  that 
during  some  boom  year  in  the  next  decade,  say  around  1925 
for  example,  the  world  will  produce  coal  at  the  rate  of 
2200  million  tons  a  year.  Continued  as  far  even  as  1950, 
the  recent  rate  of  progress  would  imply  a  world  output  in 
that  year  of  some  7500  million  tons.  And  it  will  be  seen 
that  now  we  are  reaching  figures  which  would  have  a  very 
appreciable  effect  on  the  total  supply.  Continued  to  the 
year  2000,  we  reach  a  theoretical  annual  consumption  of 
50,000  million  tons.  If  we  keep  up  this  arithmetical  exer- 
cise we  would  see  that  it  implies  the  total  exhaustion  of  all 
the  world's  coal  supplies  in  about  two  hundred  years. 

But  this  sort  of  thing,  though  it  may  be  a  pleasant  sport 
for  children  or  statisticians,  does  not  in  reality  get  us  any- 
where, for  all  these  forecasts  as  to  the  future  are  based  on 
continuation  of  the  present  rate  of  growth  in  annual  de- 
mand. Now,  when  we  come  to  consider  the  causes  of  in- 
dustrial growth,  we  will  see  that  there  is  every  reason  for 
believing,  on  the  contrary,  that  this  rate  of  growth  will  not 


no  COAL,  IRON  AND  WAR 

continue,  but  will  fall  off  markedly;  and  that  there  are  some 
reasons  for  expecting  the  decreased  rate  to  show  itself  very 
soon.  And  when  I  say  very  soon,  I  do  not  mean  the  year 
2000,  but  within  ten  or  twenty  years  from  now.  If  these 
conclusions  are  correct,  we  need  not  trouble  about  actual 
exhaustion  of  our  coal  supplies.  The  real  grounds  for  con- 
cern are  somewhat  different.  They  relate  to  the  character 
and  cost  of  the  coal  which  we  shall  have  to  use,  and  to  its 
unequal  distribution  over  the  world.  Both  contain  possi- 
bilities of  trouble,  both  within  the  nation  and  between  com- 
petitive nations. 

Cheiracter  and  costs  of  future  coal.  When  the  table  of 
world  coal  reserves  was  presented,  it  was  noted  that  it  in- 
cluded coal  of  various  grades,  ranging  from  the  best  anthra- 
cites and  bituminous  coal  down  to  some  brown  coals  and 
lignites  that  are  pretty  poor  apologies  indeed  for  fuel.  If  it 
is  ever  necessary  to  really  use  as  fuel  some  of  the  material 
that  is  included  in  these  estimates  it  will  be  a  very  difficult 
world  indeed  for  both  laborer  and  engineer,  and  still  more 
difficult  for  the  innocent  bystander. 

It  may  furthermore  be  added  that  in  addition  to  includ- 
ing some  very  poor  fuels,  the  table  includes  coal  beds  some 
of  which  are  so  thin  or  so  impure  as  to  be  commercially 
valueless  to-day.  Moreover,  much  of  the  total  reserves  as 
tabulated  are  in  coal  beds  lying  at  depths,  up  to  6000  feet 
for  example,  greater  than  are  now  profitably  worked. 
And  a  final  allowance  must  be  made  for  the  fact  that  a 
certain  proportion  of  the  known  supply  Is  so  located  geo- 
graphically as  not  to  promise  relief  for  any  existing  or  proxi- 
mate commercial  and  industrial  necessities. 

To  make  exact  and  proper  allowance  for  all  of  the  factors 
which  enter  Into  the  problem  of  coal  grades  In  our  reserve 
supply  would  be  of  course  Impossible,  and  It  would  require 
a  large  amount  of  very  detailed  Information  before  even  a 
close  approximation  to  the  truth  could  be  reached.     If  we 


THE  COAL  RESOURCES  OF  THE  WORLD       in 

were  making  a  careful  comparison  of  the  competitive  status 
of  two  given  countries  it  might  pay  to  make  the  attempt, 
but  for  our  present  purposes  it  will  be  unnecessary.  By 
making  some  very  rough  deductions  from  our  previous  table 
we  can  arrive  at  results  which  are  close  enough  for  the  uses 
to  which  they  will  be  put. 

In  doing  this,  we  can  start  by  deducting  all  the  reserve 
tonnage  of  brown  coals  and  lignites.  It  is  true  that  these 
coals  are  mined  even  now  in  many  localities,  and  that  their 
use  will  undoubtedly  increase  as  the  higher  grade  coals  be- 
come dearer;  but  under  existing  industrial  conditions  they 
can  never  furnish  a  very  high  percentage  of  the  total  fuel 
requirenients.  So  far  the  present  calculations,  which 
postulate  a  world  of  about  the  current  industrial  type,  the 
anthracite  and  bituminous  coals  alone  need  to  be  con- 
sidered. 

A  second  series  of  deductions  should  logically  be  made  to 
dispose  of  the  coals  described  in  the  various  reports  as  be- 
ing very  thin,  or  under  very  heavy  cover.  These  will  also 
reach  market  in  the  future,  but  not  in  any  large  quantity 
except  at  a  great  increase  over  normal  costs.  These  de- 
ductions, which  of  course  are  subject  to  large  possibility  of 
difference  of  opinion  and  errors  of  judgment,  would  make 
quite  large  reductions  in  the  tonnages  reported  for  several 
European  countries,  but  would  leave  those  reported  for  the 
United  States  and  China  unchanged.  Under  these  circum- 
stances there  will  be  no  need  to  make  them,  since  they  can 
have  little  influence  on  future  competition. 

If  then,  we  consider  only  the  anthracite  and  bituminous 
coals,  we  get  even  figures  about  as  follows,  which  represent 
approximately  the  tonnage  of  high  grade  fuels  still  avail- 
able. The  figures  given  on  page  1 1 2  are  in  units  of  a 
thousand  million  tons. 

Perhaps  half  of  this  tonnage  is  so  located  as  to  be  mined 
without  over-great  difficulty,  but  even   after  making  this 


135 

i( 

55 

« 

30 

« 

112  COAL,  IRON  AND  WAR 

large  allowance  for  deep-level  coals  we  have  remaining  over 
two  million  million  tons. 

North  America 2260  thousand  million  tons 

Asia  1170 

Europe   750 

Australasia    

Africa    

South  America   

World  total 4400  thousand  million  tons 

This  total  may,  I  think,  be  accepted  as  a  reasonable 
estimate  of  the  high-grade  coal  still  available  for  the  use 
of  the  world,  at  moderate  depth  and  under  ordinarily  ex- 
pensive working  conditions.  It  is  admittedly  based  upon 
data  of  very  variable  value,  but  the  differences  as  to  thick- 
ness, depth,  location,  etc.,  are  of  such  a  character  as  to  give 
a  fair  average  for  the  total  estimates.  It  is  obviously  a 
total  stated  in  vast  tonnages;  it  implies  that  there  is  a 
thousand  years'  supply  at  the  present  rate  of  output;  and 
that  even  if  the  world's  rate  of  coal  consumption  increases 
in  future  as  steadily  as  it  has  in  the  past,  it  will  be  several 
hundred  years  before  the  better  grades  of  coal  disappear 
from  use.  Regarded  merely  as  a  total,  the  effect  is  reas- 
suring. There  are,  however,  other  aspects  of  the  matter 
which  are  worth  further  study,  for  when  we  examine  the 
manner  in  which  this  total  reserve  Is  distributed  geographi- 
cally it  becomes  evident  that  serious  shifts  in  the  location  of 
the  greater  manufacturing  industries  may  fairly  be  expected 
at  no  very  distant  date. 

The  Geographic  Distribution  of  Coal  Reserves 

Having  discussed,  briefly  at  least,  some  of  the  more  im- 
portant general  points  regarding  the  world's  coal  reserves 
considered  as  a  whole,  it  is  now  possible  to  turn  to  a  matter 
still  more  important,  in  its  bearing  on  industrial  develop- 


THE  COAL  RESOURCES  OF  THE  WORLD      113 

ment  and  on  past  and  future  international  relations.  This 
is  the  manner  in  which  the  known  coal  reserves  are  dis- 
tributed geographically,  and  the  extent  to  which  different 
nations  are  the  possessors  of  these  reserves.  It  will  be  seen 
immediately  that  the  distribution,  both  geographic  and 
national,  is  very  uneven  indeed.  The  fact  that  such  in- 
equahties  exist  is  currently  recognized,  but  the  extent  and 
the  effects  of  the  inequalities  are  not  so  commonly  under- 
stood. 

For  the  sake  of  clearness,  it  will  be  well  to  take  up  the 
question  geographically,  by  continents,  in  the  order  of  their 
coal  importance  as  indicated  in  the  preceding  table.  That 
involves  consideration  of  the  continents  as  follows:  North 
America,  Asia,  Europe,  Australasia,  Africa  and  South 
America. 

North  America.  Of  the  4400  thousand  million  tons  of 
high-grade  coal  reserves.  North  America  accounts  for  2260, 
or  more  than  half  of  the  world's  total  supplies.  Of  this 
little  or  none  exists  in  Mexico  or  the  states  of  Central  Amer- 
ica, and  only  a  relatively  small  tonnage  of  doubtfully  utiliz- 
able  coal  in  Newfoundland.  The  large  tonnages  are  in  the 
United  States  and  the  Dominion  of  Canada,  and  these  two 
nations  are  supplied  as  follows: 

United  States   1975  thousand  million  tons 

Dominion  of   Canada 286         "  "         " 

The  United  States  has  therefore  almost  exactly  40  per 
cent,  of  the  world's  supply  of  coal,  and  Canada  about  7  per 
cent. 

Asia.  Asia  ranks  second  of  the  continents  so  far  as  coal 
reserve  is  concerned,  having  some  1170  thousand  million 
tons,  or  about  a  quarter  of  the  world  total.  The  distribu- 
tion of  the  Asiatic  reserve  is  even  more  localized  than  that 
of  North  America,  for  China  accounts  for  almost  all  of 
it.  The  figures  regarding  the  leading  Asiatic  countries  are 
shown  on  page  114, 


114  COAL,  IRON  AND  WAR 

China 995  thousand  million  tons 

India   79 

Siberia  67 

French   Indo-China 20 

Japan    8 

The  Chinese  reserve  is  therefore  about  five-sixths  that  of 
all  Asia,  or  a  little  over  a  fifth  of  the  total  world  supply. 
China  and  the  United  States  together  account  exactly  over 
two-thirds  of  the  world^s  reserve  of  high-grade  coal,  a  fact 
which  must  always  be  taken  into  account  in  considering  the 
trend  of  industrial  development  in  the  future. 

Europe.  Third  in  rank  among  the  continents  as  a  pos- 
sessor of  coal,  Europe  has  remaining  some  750  thousand 
million  tons,  or  about  one  sixth  of  the  world's  reserves  of 
high-grade  fuel. 

Prior  to  the  World  War,  the  figures  for  the  distribution 
of  this  European  total  among  the  different  nations  were  as 
follows : 

German  Empire 410  thousand  million  tons 

Great  Britain   190 

Russia  in  Europe 58         '* 

Austro-Hungary 45 

France   16 

Belgium    11 

Spain   8 


((  it 

Holland    4 


The  remaining  small  tonnages  are  scattered  widely  among 
the  smaller  states.  From  this  it  will  be  seen  that  at  the 
outbreak  of  war  the  German  Empire  covered  about  one 
tenth  of  the  world  coal  supply,  ranking  third  to  the  United 
States  and  China.  But  in  considering  the  future  of  Ger- 
many and  the  other  European  powers,  it  must  be  borne  in 
mind  that  the  peace  treaty  brought  about  a  sharp  read- 
justment not  only  of  Iron  ore  reserves  but  of  coal  reserves. 
The  former  question  has  been  noted  on  a  previous  page 
(p.  85)  ;  and  both  will  be  recurred  to  In  more  detail  in 


THE  COAL  RESOURCES  OF  THE  WORLD       115 

a  later  chapter,  when  the  future  of  world  competition  Is 
under  discussion. 

Australasia.  The  three  continents  already  discussed  are 
the  coal-rich  areas  of  the  world,  for  North  America,  Asia 
and  Europe  contain  over  nine-tenths  of  the  total  fuel  sup- 
ply of  the  world.  The  three  which  remain  to  be  discussed 
are  not  only  relatively  but  absolutely  deficient  In  coal. 

Among  these  three,  however,  there  are  wide  differences 
in  degree  of  poverty.  Australasia,  for  example,  contains 
some  135  thousand  million  tons  of  coal,  or  two-thirds  as 
much  as  Great  Britain,  and  since  the  bulk  of  this  tonnage 
Is  concentrated  in  the  British  possessions,  there  Is  the  cer- 
tainty that  Industrial  development  will  have  a  sufficiently 
great  fuel  basis  to  become  Important.  Of  the  total  credited 
to  Australasia,  practically  all  Is  in  Australia,  and  118  thou- 
sand million  tons  of  it  is  in  New  South  Wales. 

Africa.  The  relatively  small  known  coal  reserve  of 
Africa  Is  similarly  concentrated  in  British  possessions,  for 
of  the  total  of  56  thousand  million  tons  credited  to  the 
whole  continent,  all  except  a  trifling  amount  are  in  South 
Africa. 

South  America.  Poorest  of  all  the  continents  In  coal 
supplies,  even  the  small  tonnages  credited  to  South  America 
are  so  located  as  to  have  little  influence  on  trade  or  industry. 
Of  Its  32  thousand  million  tons  of  coal  reserves,  27  are  In 
the  mountainous  region  of  Columbia.  The  Chilean  supply, 
small  in  reserve  however,  is  the  only  South  American  coal 
which  has  even  a  small  effect  on  the  commerce  of  the  world. 

The  coal  situation;  summary.  The  preceding  pages 
have  placed  before  the  reader  the  chief  facts,  necessarily  in 
very  brief  form,  relative  to  the  coal  supplies  of  the  world. 
Our  Interest  In  the  matter  lies,  of  course.  In  the  bearing  of 
these  facts  on  the  questions  of  present  and  future  industrial 
development  In  the  various  countries,  and  In  Its  future  effects 
on  world  competition  and  leadership.     These  matters  we 


,ii6  COAL,  IRON  AND  WAR 

will  recur  to  later,  in  Chapter  XXIII.  At  present  it  will  be 
well  to  summarize  the  main  facts  brought  out  so  far.  They 
seem  to  be  about  as  follows : 

1.  The  coal  reserves  of  the  world  are  known  to  be  very 
large,  even  as  compared  to  a  future  increased  demand.  The 
period  before  which  any  trace  of  general  exhaustion  need  be 
feared  is  to  be  measured,  even  from  the  most  pessimistic 
standpoint,  in  centuries. 

2.  As  demand  continues,  however,  we  are  steadily  using 
coal  of  a  little  lower  grade,  and  coal  that  is  a  little  more 
difficult  and  expensive  to  mine.  These  facts  have  a  direct 
bearing  on  future  coal  costs  and  on  future  manufacturing 
costs  in  other  lines. 

3.  The  coal  supplies  of  certain  manufacturing  districts 
and  of  certain  countries  are  further  advanced  toward  ex- 
haustion than  are  those  of  some  existing  or  possible  com- 
petitors. There  will  therefore  be  seen  changes  in  relative 
importance  of  manufacturing  centers,  and  gradual  but  cer- 
tain changes  in  kinds  of  industry  practiced. 

4.  In  the  very  near  future  it  is  probable  that  the  entry 
of  new  continents  into  the  industrial  field  will  make  still 
greater  changes  in  manufacturing,  in  world  competition  and 
in  world  leadership.  These  may  bring  about  changes  in 
social  and  industrial  structure  among  the  older  nations,  es- 
pecially among  those  most  hardly  pressed  by  their  own  de- 
creasing coal  supplies  and  by  the  new  competition. 


CHAPTER  X 

PETROLEUM,  NATURAL  GAS  AND  WATER-POWER 

The  three  power-producers  to  be  considered  in  the  present 
chapter,  unlike  in  other  respects,  agree  in  that  they  often 
serve  as  the  basis  for  vague  and  not  entirely  well-founded 
optimism  regarding  the  industrial  effects,  in  the  future,  of 
the  decreasing  grade  and  increasing  cost  of  our  coal  supplies. 
Whenever  any  question  arises  as  to  the  manufacturing  diffi- 
culties which  even  now  confront  some  of  the  leading  nations, 
there  is  always  someone  at  hand  to  blandly  observe  that 
no  trouble  about  coal  supplies  need  be  serious,  because  oil 
or  water  power  will  replace  coal  anyway  in  the  near  future. 
It  may  be  worth  while  to  examine  this  question  a  little  more 
carefully  than  usual,  in  order  to  get  some  idea  as  to  the 
future  probabilities  in  either  of  these  directions.  It  will 
be  found,  perhaps,  that  wide  as  may  be  the  applications  of 
these  newer  agents,  they  will  probably  not  serve  as  direct 
replacers  of  coal,  at  least  to  any  large  or  constant  extent. 
Both  water  power  and  petroleum  will  undoubtedly  have 
important  effects  on  the  industrialism  of  the  future,  but 
these  effects  will  be,  to  a  considerable  degree,  unlike  the 
effects  which  coal  has  produced. 

Petroleum 

Since  its  discovery,  as  a  commercial  product,  just  before 
the  Civil  War,  the  production  and  utilization  of  petroleum 
have  been  kept  before  the  pubHc  mind  so  steadily,  for  one 
cause  or  another,  that  we  are  likely  to  over-estimate  both 
the  present  industrial  importance  of  the  mineral  oil  in- 
dustry, and  the  probabilities  as  to  its  continued  growth  and 
increase  of  supply. 

As  regards  the  first  point,  it  is  still  safe  to  say  that  if  the 

117 


ii8  COAL,  IRON  AND  WAR 

entire  petroleum  supply  of  the  world  were  to  be  cut  off  com- 
pletely to-day,  it  would  mean  that  we  would  have  to  increase 
our  coal  mining  some  eight  per  cent,  at  the  most  to  replace 
the  missing  product  in  technical  efficiency.  What  would 
actually  happen  in  such  a  case  would  be  that  the  coal  output 
would  increase  only  four  or  five  per  cent.,  and  that  the  bal- 
ance of  the  deficit  would  be  made  up  by  distillation  of  shales, 
to  get  not  petroleum  but  its  derivatives. 

The  second  point  raised  —  the  duration  of  the  petroleum 
supply  —  is  of  more  immediate  practical  importance.  The 
case  seems  to  be  that  we  are  here  dealing  with  a  mineral 
resource  whose  annual  output  is  already  excessive,  as  com- 
pared with  the  known  or  probable  remaining  supplies  in  the 
earth.  That  is  to  say,  we  are  using  up  a  far  larger  per- 
centage of  our  total  petroleum  reserve  than  of  our  coals 
or  iron  ores,  for  example.  This  is  partly  brought  about 
by  the  cheapness  with  which  oil  wells  can  be  sunk  and  heavy 
production  brought  in,  and  the  consequent  tendency  to  flood- 
ing the  market  during  bad  times.  It  is  likely  to  continue 
at  a  constantly  increasing  rate  unless  some  degree  of  com- 
munity of  ownership  puts  a  stop  to  excessive  development. 
Barring  some  such  future  regulation  of  the  industry,  we  are 
likely  to  see  petroleum  produced  in  increasingly  large  quan- 
tities, even  during  periods  of  very  low  prices,  so  as  to  form 
a  heavy  draft  against  what  is  really  a  very  small  total  sup- 
ply in  the  ground.  Our  children  will  in  all  probability  see 
the  end  of  the  petroleum  industry. 

Growth  of  the  oil  industry.  The  existence  of  petroleum 
has  been  known  for  centuries,  and  it  was  used  to  a  small  ex- 
tent in  many  countries  prior  to  the  great  commercial  devel- 
opment of  the  past  sixty  years.  But  as  the  basis  of  a  real 
industry,  its  history  goes  back  only  to  a  few  years  before 
our  Civil  War.  In  1857  Roumania  first  shipped  petroleum, 
and  in  1859  the  first  well  was  sunk  in  Pennsylvania.  The 
published  data  give  a  world  total  of  less  than  510  thousand 
barrels  in  i860,  of  which  500,000  are  credited  to  the  United 


PETROLEUM,  NATURAL  GAS,  WATER-POWER       119 

States.  In  considering  these  and  later  figures,  it  will  be 
well  to  recall  that  the  barrel  of  crude  petroleum  contains 
42  gallons,  while  the  barrel  for  refined  oils  contains  50 
gallons. 

By  1870  Canada  and  Russia  had  entered  the  producing 
list,  but  the  United  States  still  produced  over  five  million 
barrels,  out  of  a  world  total  of  less  than  six  million.  The 
next  decade  saw  the  entry  of  Galicia,  Japan  and  Germany, 
and  a  world  total  of  thirty  million  barrels  in  1880,  of  which 
over  26  million  were  the  output  of  the  United  States,  By 
1890  the  total  had  risen  to  76  millions,  of  which  46  were 
derived  from  the  United  States  and  29  million  from  Russia, 
no  other  country  producing  as  much  as  one  million  barrels. 

In  1900  the  world  total  was  149  million  barrels,  Russia 
leading  with  an  output  of  76  miUion  and  the  United  States 
taking  second  place  with  64.  It  may  be  noted  that  in  the 
following  year,  1901,  Russia  reached  her  maximum  output 
to  date,  producing  over  85  million  barrels,  since  which  the 
falling  off  has  been  quite  steady.  By  this  time  the  original 
producing  list  had  been  swelled  by  the  addition  of  India, 
the  Dutch  East  Indies  and  Peru,  all  of  which  were  later  to 
become  quite  important  producers. 

In  the  year  before  the  war,  19 13,  the  world  produced 
385  million  barrels  of  petroleum.  Of  this  total,  the  United 
States'  output  was  248  million  barrels,  almost  two-thirds 
of  the  entire  world  supply.  Russia  was  second,  with  63 
million  barrels,  and  Mexico  a  very  bad  third,  with  30  mil- 
lion barrels. 

The  totals  for  growth  by  decades,  which  have  just  been 
given,  are  more  illuminating  when  we  use  them  as  a  basis 
for  calculating  the  rate  of  growth.  The  table  on  page  120 
shows  the  percentage  of  increase  during  each  decade  from 
i860  to  1910. 

Assuming  that  the  rates  for  the  three  later  decades  may 
represent  fairly  the  average,  after  the  first  sudden  expansion 
had  taken  place,  we  hav^  ^  rate  of  123  per  cent,  per  decade, 


120  COAL,  IRON  AND  WAR 

1860-1870 1030  per  cent,  per  decade 

1870-1880 420       " 

1880-1890.. 155       " 

1890-1900 95       " 

1900-1910 120       '' 

equivalent  to  only  a  little  less  than  ten  per  cent,  annually. 
This  is  twice  the  current  rate  of  growth  of  the  coal  and  iron 
industries  of  the  world,  but  because  of  the  fatal  ease  of  its 
extraction  petroleum  may  be  expected  to  keep  up  a  rela- 
tively high  rate  of  growth  for  another  decade  or  two  at 
least.  After  that,  unless  our  present  knowledge  of  petro- 
leum supplies  is  fatally  defective,  we  may  expect  to  see  a 
lower  rate  of  increase,  due  to  scarcity  of  supply. 

The  occurrence  of  petroleum.  So  far  we  have  accepted 
the  occurrence  of  petroleum  in  the  world's  markets  as  a 
normal  trade  product,  without  inquiring  too  closely  into  the 
question  of  how  it  comes  to  reach  these  markets.  But  be- 
fore discussing  its  treatment  and  utilization  it  may  be  well 
to  pay  some  attention  to  its  mode  of  occurrence,  for  it  will 
be  found  that  this  exerts  powerful  effects  on  the  characteris- 
tics of  the  petroleum  industry. 

In  doing  this  there  will  be  no  attempt  to  consider  the 
finer  points  of  difference  in  scientific  opinion,  for  few  of 
these  have  any  bearing  on  our  immediate  problem.  We 
will  merely  accept  the  fact  that  petroleum  is  a  natural  min- 
eral oil,  derived  originally  from  marine  deposits  —  sands, 
clays,  etc. —  which  contained  abundant  animal  or  vegetable 
remains.  These  deposits,  later  buried  under  other  beds  of 
rock,  have  been  for  long  periods  subjected  to  the  heat  and 
pressure  of  the  earth's  crust,  and  portions  of  the  original 
organic  matters  contained  have  been  distilled  off  to  form 
the  petroleum  which  we  use  to-day. 

Earth  movements  have  aided,  not  only  in  the  formation 
of  the  oil,  but  in  its  present  concentration,  and  have  to  some 
extent  at  least  determined  its  present  areas  of  accumulation. 


PETROLEUM,  NATURAL  GAS,  WATER-POWER       121 

When  the  prospector's  drill  finally  encounters  petroleum 
it  does  not  do  so  by  breaking  into  an  underground  lake  or 
pool  or  stream  of  oil,  as  is  often  supposed  by  naive  specu- 
lators in  oil  stocks,  for  such  free  underground  accumulations 
of  petroleum  do  not  exist.  The  drill  merely  enters  a 
stratum  or  bed  of  rock,  usually  sand  or  sandstone  or  lime- 
stone, in  which  petroleum  fills  the  spaces  or  pores  between 
the  grains  of  rock.  The  occurrence  is  entirely  comparable 
to  the  condition  in  which  underground  water  is  found  by  a 
well. 

The  petroleum,  once  found,  may  be  forced  to  the  surface 
naturally  by  gas  pressure,  or  it  may  require  pumping  almost 
from  the  start.  The  flow  per  well  may  be  large,  as  often 
illustrated  in  newspaper  reports,  or  small,  which  is  the  com- 
moner occurrence.  The  oil  may  be  a  light  oil,  or  a  heavy 
poorer  grade  oil.  The  field,  as  outlined  by  later  drilling, 
may  be  small,  or  it  may  cover  hundreds  of  square  miles. 
All  of  these  factors  must  be  taken  into  consideration  in 
getting  an  idea  of  the  commercial  value  or  industrial  effect 
of  a  new  oil  discovery. 

But  in  any  case,  the  time  an  oil-field  attracts  public  atten- 
tion is  usually  during  its  first  year  of  really  large  output, 
for  oil  fields  have  a  pretty  steady  tendency  toward  reaching 
a  maximum  of  output  very  rapidly,  and  then  showing  a 
slowly  declining  tendency  for  a  greater  or  lesser  number  of 
years  until  they  are  finally  exhausted. 

The  great  profits  of  a  successful  oil  area,  as  well  as  its 
rapid  attainment  of  maximum  production  and  its  subsequent 
short  life,  compared  with  the  results  obtained  from  coal, 
iron  or  other  mineral  ventures,  are  due  substantially  to  the 
same  cause.  That  is  the  cheapness  with  which  oil  output 
can  be  developed,  as  compared  with  the  slowness  and  ex- 
pense of  developing  a  mining  area.  A  well  costs  only  about 
one-tenth  as  much,  per  foot  of  descent,  as  a  shaft;  and  it 
can  be  put  down  in  much  quicker  time.     When  it  is  once  in 


12^  COAL,  IRON  AND  WAR 

contact  with  the  oil,  operating  expenses  are  trifling,  for  In 
many  cases  the  oil  reaches  the  surface  under  natural  gas 
pressure,  and  in  the  others  it  has  merely  to  be  pumped. 
There  are  not  the  expenses  for  breaking  ore,  timbering, 
haulage,  etc.,  which  are  common  to  all  other  kinds  of  mineral 
development. 

These  factors  make  successful  oil  regions  very  profitable, 
but  they  also  tend  to  make  them  very  short-lived. 

Petroleum  and  its  products.  Crude  petroleum,  as  it 
issues  from  the  well,  is  a  liquid  varying  quite  widely  in  dens- 
ity, color  and  composition.  As  to  the  former  point,  it  may 
range  from  a  liquid  almost  as  heavy  as  water,  as  are  the 
Mexican  and  Argentine  oils,  to  one  only  four-fifths  as  heavy, 
as  are  the  better  grade  Pennsylvania  and  West  Virginia  oils. 
As  a  rule  the  lighter  petroleums  will  yield  a  larger  propor- 
tion of  such  products  as  kerosene  and  benzene,  while  the 
heavier  oils  will  yield  more  paraffine,  asphalt,  etc.  Gener- 
ally speaking,  the  naturally  light  oils  yield  the  higher  value 
of  total  product. 

The  petroleum  products,  of  which  mention  has  been 
made,  are  derived  from  the  crude  petroleum  by  refining, 
which  Is  essentially  a  series  of  distillations,  based  on  the 
fact  that  different  products  distill  off  at  different  tempera- 
tures. 

An  idea  of  the  relative  commercial  Importance  of  the 
various  petroleum  products,  grouped  broadly,  is  secured 
from  the  following  data  as  to  the  refinery  output  of  the 
United  States  during  recent  years,  the  statistics  being  those 
collected  by  the  Bureau  of  Mines. 

igi6  1917  1918 

Gasolene,  gallons  2,058,900,000  2,850,500,000  3,570,300,000 

Kerosene,   etc.,   gallons 1,455,500,000  1,726,800,000  1,825,400,000 

Fuel  and  gas  oils 4,663,900,000  6,513,300,000  7,321,400,000 

Lubricating  oils    624,500,000  753,800,000  841,500,000 

Residuals,   gallons    239,200,000  702,200,000  1,286,700,000 

Wax,  pounds  386,200,000  481,200,000  505,100,000 

Asphaltum,  tons   716,490  739,425  607,968 

Coke,   tons    405,319  539,366  559,663 


PETROLEUM,  NATURAL  GAS,  WATER-POWER       123 

The  utilization  of  petroleum.  In  order  to  get  some 
clearer  idea  of  the  facts  regarding  this  vexed  question,  it 
will  be  well  to  consider  the  various  ways  in  which  petroleum 
is  utilized  in  the  industry  and  commerce  of  the  world. 
These  fall,  classifying  the  uses  very  broadly,  into  four 
groups : 

First,  petroleum  or  heavy  products  are  used  directly  as 
fuel  under  boilers,  in  place  of  coal. 

Second,  gasoline  or  some  other  petroleum  derivative  may 
be  used  as  a  fuel  for  internal  combustion  engines. 

Third,  kerosene  and  some  other  petroleum  derivatives 
are  used  largely  for  illuminating  purposes. 

Fourth,  petroleum  is  used  as  a  basis  or  raw  material  for 
making  various  pharmaceutical  and  chemical  pro- 
ducts. 

Now,  if  we  look  over  this  classification,  we  will  see  im- 
mediately that  the  question  of  how  far  petroleum  will  re- 
place coal,  or  compete  with  it,  depends  in  large  part  on  the 
particular  kind  of  use  we  have  in  mind.  Petroleum  used 
as  a  direct  fuel,  under  boilers,  does  replace  coal  directly, 
more  than  ton  for  ton.  But  when  gasoHne  is  used  in  an 
internal  combustion  engine  it  does  not  replace  coal  or  com- 
pete with  it  directly,  for  obviously  coal  can  not  be  used  for 
such  purposes.  For  the  remaining  uses  —  as  an  illuminant 
or  as  a  raw  material  for  chemical  manufactures,  petroleum 
and  its  derivatives  are  almost  equally  Independent  of  the 
coal  market. 

We  are  likely  to  overlook  these  very  plain  features  of 
the  matter,  particularly  because,  during  the  World  War,  the 
demand  for  oil  was  greatest  along  certain  directions  which 
may  not  be  the  important  things  after  the  war. 

The  basis  of  petroleum  reserve  estimates.  Fashions 
change  In  mining  geology  as  in  other  lines  of  human  interest 
and  endeavor,  though  aside  from  the  professional  group 


124  COAL,  IRON  AND  WAR 

who  are  personally  interested  in  such  matters  the  fact  is 
rarely  understood.  Twenty  years  ago  the  few  geologists 
who  applied  their  scientific  training  to  commercial  utilities 
did  so,  with  few  exceptions,  along  the  line  of  precious  metal 
mining.  A  decade  later,  and  a  widespread  activity  in  cop- 
per developments  brought  along  with  it  a  new  group  of  min- 
ing geologists,  speciaHzing  in  copper-ore  deposits.  Within 
the  past  ten  years  the  trend  has  again  changed,  and  now  we 
find  a  large  number  of  trained  geologists  handling  the  pros- 
pecting and  development  of  oil  properties. 

In  the  earliest  stage  of  petroleum  history,  the  matter  of 
well  location  was  purely  a  matter  of  chance,  helped  along 
it  may  be  by  recourse  to  divining  rods  or  by  the  advice  of 
local  men.  The  geology  of  petroleum  was  not  clearly 
understood,  the  conditions  which  facilitated  or  prevented 
its  accumulation  at  any  given  locality  were  still  less  definitely 
comprehended.  Under  these  circumstances  it  is  not  strange 
that  little  help  was  received  from  geologists  during  the 
early  stages  of  the  oil  industry  in  this  country  and  elsewhere. 
A  trained  man  could,  it  is  true,  prevent  the  driller  from 
making  certain  very  obvious  mistakes,  but  he  could  hardly 
go  further,  and  give  any  advice  which  would  yield  positive 
results. 

With  the  development  by  I.  C.  White  of  the  anticlinal 
theory,  as  applied  to  oils  occurring  in  the  Appalachian  and 
similar  fields,  the  possibilities  of  scientific  help  became  enor- 
mously enlarged.  From  that  time  on  it  was  commonly 
recognized  that  close  and  careful  study  of  the  geologic  struc- 
tures of  a  folded  region  would  enable  fairly  accurate  pre- 
dictions as  to  success  or  failure  likely  to  be  encountered  in 
certain  general  regions.  Advantage  was  commonly  taken 
of  this  fact  in  well  location,  but  for  the  moment  nothing 
further  could  be  expected. 

As  petroleum  development  spread  away  from  its  original 
center  in  the  Pennsylvania  region,  the  services  of  geologists 
were  again  called  into  requisition,  to  face  entirely  new  con- 


PETROLEUM,  NATURAL  GAS,  WATER-POWER      125 

ditions  and  to  develop  broader  theories  of  oil  accumulation. 
The  growth  of  the  applied  science  was  slow,  and  for  many 
years  it  seemed  as  if  little  more  help  could  be  expected  from 
geology.  The  fields  of  Indiana,  Illinois  and  Kansas  were 
in  well-developed  commercial  condition  before  any  advance 
could  be  noted  on  the  theoretical  side  of  the  question. 

The  real  opportunity  for  the  petroleum  geologists  came 
with  the  opening  of  the  Texas  and,  later,  of  the  California 
and  Mexican  fields.  The  oils  in  these  fields  were  of  differ- 
ent type  from  those  found  in  most  of  the  older  regions;  and 
they  occurred  under  considerably  different  geological  condi- 
tions. These  facts,  which  at  the  outset  might  have  been 
looked  upon  as  handicaps  to  scientific  aid,  turned  out  in  the 
long  run  to  be  distinct  advantages.  A  group  of  men, 
thoroughly  and  broadly  trained  in  structural  and  general 
geology,  but  little  used  to  the  older  oil  fields,  took  up  the 
entire  problem  de  novo.  Detailed  studies  produced,  at  first, 
few  results  which  could  be  put  to  practical  service ;  but  per- 
sistent attention  to  the  problems  involved  at  last  brought 
about  a  very  decided  change  in  the  situation.  The  practical 
results  have  been  more  surprising  than  is  ordinarily  realized. 
There  is  still  a  large  element  of  luck  in  connection  with  the 
drilling  of  oil  wells,  but  on  the  other  hand  there  are  many 
important  petroleum  fields  in  which  estimates  and  locations 
can  be  made  with  but  little  less  accuracy  than  in  dealing 
with  a  coal  field  or  a  series  of  iron  ore  deposits. 

The  result,  of  course,  is  that  all  of  the  large  producing 
companies  now  carry  out  geological  work  for  their  own 
account  on  a  very  extensive  scale.  Lord  Cowdray's  great 
Mexican  success,  the  Aguila  Oil  Company,  was  at  first  of 
little  promise,  and  has  attained  its  productive  capacity 
under  the  careful  study  of  a  former  chief  geologist  of  the 
United  States  Geological  Survey,  later  vice-president  of  the 
Aguila  company.  Another  American  geologist,  also  a 
former  member  of  the  Federal  Survey,  handled  the  extensive 
attempt  at  petroleum  development  in   China  carried  out 


126  COAL,  IRON  AND  WAR 

prior  to  the  war  by  an  American  corporation.  Practically 
all  of  the  oil  development  now  going  on  in  California, 
Mexico  and  South  America  is  under  the  direct  charge  of 
trained  geologists,  mostly  it  may  be  noted  of  Americans 
trained  in  the  Gulf  and  Pacific  Coast  oil  fields. 

It  would  of  course  be  an  error  to  assume  that  absolute 
precision  and  unfailing  prophecy  are  now  possible  in  the  oil 
business.  But,  on  the  other  hand,  it  is  fair  to  say  that  with 
properly  detailed  examinations  and  studies  a  petroleum  de- 
velopment can  be  placed  upon  substantially  the  same  basis 
of  accuracy  as  any  other  mining  operation.  And  this,  it 
may  be  noted,  is  really  accuracy  of  a  far  higher  grade  than 
is  suspected  by  the  public.  Those  who  are  only  acquainted 
with  mining  work  through  the  medium  of  swindler's  pros- 
pectuses do  not  realize  just  how  definitely  organized  a  busi- 
ness it  can  be  made  when  carried  out  by  a  large  and  well- 
organized  staff.  There  is  still  wide  range  of  possible  error 
in  dealing  with  a  small  individual  mineral  deposit,  but  even 
these  opportunities  for  local  error  will  become  relatively 
unimportant  when  taken  as  part  of  an  extensive  series  of 
observations  and  estimates  on  a  large  group  of  deposits. 
In  similar  fashion  the  geologist  may  be  unable  to  foretell 
the  exact  results  which  will  be  obtained  from  a  single  well; 
but  the  estimates  for  a  large  field  will  be  close  enough  to  the 
truth  to  serve  as  a  sound  basis  for  commercial  development. 
The  net  result,  so  far  as  we  are  concerned  at  present,  is  that 
estimates  of  the  total  reserve  tonnage  of  petroleum  still 
remaining  in  known  fields,  and  of  the  probable  future  exten- 
sions of  these  fields,  may  be  accepted  with  a  high  degree  of 
confidence.  We  may  now  consider  what  the  best  of  such 
estimates  seem  to  indicate  with  regard  to  the  duration  and 
sources  of  our  future  petroleum  supply. 

Chief  sources  of  petroleum  supply.  Heretofore,  as  we 
have  seen  when  considering  the  growth  of  petroleum  output, 
the  United  States  has  been  the  world's  chief  source  of  petro- 
leum from  the  commencement  of  the  industry.     That  con- 


PETROLEUM,  NATURAL  GAS,  WATER-POWER       127 

dition,  however,  will  not  continue  always,  and  we  have  some 
reason  for  thinking  that  it  is  even  now  close  to  its  end. 
During  the  past  decade  five  careful  estimates  have  been 
made  and  published  at  different  times  by  different  author- 
ities, and  all  of  these  agree  substantially  in  their  results. 
Brought  up  to  date,  the  estimates  of  Mr.  Ralph  Arnold 
imply  that  at  the  close  of  19 19  the  oil  remaining  in  the 
ground  in  the  United  States  may  amount  to  some  four 
thousand  million  barrels;  the  most  recent  estimate,  by  Dr. 
David  White,  would  place  the  unused  reserve  at  the  same 
date,  at  less  than  six  thousand  million. 

What  these  figures  mean  with  regard  to  the  future  of  the 
American  supply  is  clear  enough.  Accepting  the  larger  esti- 
mate, our  unused  petroleum  will  last  some  fifteen  years  at 
the  current  rate  of  production,  or  far  less  than  ten  years 
if  the  production  should  increase  as  it  has  done  in  recent 
decades.  This  means  that  prices  will  increase  sharply  un- 
less some  new  sources  of  at  least  equal  importance  are 
found.  Later  we  will  note  where  these  new  sources  may 
lie. 

At  present,  however,  there  is  another  point  of  interest 
about  the  American  oil  reserve,  and  this  deals  with  its 
character.  As  indicated  in  the  table  giving  unused  oil  by 
fields,  almost  half  of  the  total  American  reserve  is  the 
relatively  low  grade  oil  of  the  California  and  Gulf  fields, 
yielding  little  in  the  lighter  products,  such  as  gasoline. 
Evidently  the  light  oils  will  rise  more  in  price  than  the 
heavy  oils,  so  far  as  the  United  States  alone  is  concerned. 
The  figures  on  page  128  have  been  re-grouped,  and  changed 
slightly  from  the  original  form  in  which  they  were  presented 
by  White,  in  order  to  make  use  of  the  final  19 18  production 
statistics.  With  the  19 19  output  subtracted,  we  seem  to 
have,  at  the  opening  of  1920,  about  6,350  million  barrels 
of  oil  remaining  in  the  American  deposits.  If  the  United 
States  keeps  up  its  present  rate  of  output,  less  than  fifteen 
years  should  see  the  end  of  the  domestic  oil  supply. 


128  COAL,  IRON  AND  WAR 

Petroleum  Resources  of  the  United  States 

Available  oil 

Total  output  left  in  ground 

1857-1918  Output  in  1918  at  end  of 

Oil  field                                     inclusive  barrels  iQiS,  bbls. 

Appalachian    1,221,800,000  25,400,000  550,000,000 

Lima-Indiana    448,500,000  3,220,000  40,000,000 

Illinois   298,200,000  13,370,000  175,000,000 

Mid-Continent  1,171,400,000  179,380,000  2,215,000,000 

Gulf    306,500,000  24,210,000  750,000,000 

Rocky    Mountain 50,610,000  12,810,000  750,000,000 

California    1,110,200,000  97,530,000  2,250,000,000 

Total   U.   S 4,607,210,000  355,930,000  6,730,000,000 

We  are  now  in  position  to  draw  some  definite  conclusions 
as  to  the  relative  value  and  importance  of  coal  and  oil  sup- 
plies. In  the  previous  chapter  it  was  noted  that  the  United 
States  had  an  unmined  coal  reserve  of  some  1975  rriillion 
tons.  We  how  see  that  its  petroleum  reserve,  converting 
barrels  into  tons,  amounts  to  only  one  two-thousandths  of 
its  coal  supply.  Or,  to  put  the  matter  in  another  and  per- 
haps more  striking  way:  If  we  stopped  mining  American 
coal  to-day,  and  let  American  petroleum  take  its  place,  all 
of  our  oil  deposits  would  be  exhausted  in  almost  fifteen 
months.  It  would  be  well,  before  becoming  too  optimistic 
as  to  the  future  replacement  of  coal  by  petroleum,  to  get 
some  idea  of  actual  facts  as  opposed  to  cheerful  imaginings. 
We  have  just  as  much  real  chance  of  replacing  coal  by  oil 
as  we  have  of  finding  enough  gold  to  use  it  in  place  of  steel. 

The  future  of  the  oil  industry.  These  are  unpleasant 
facts,  but  they  may  as  well  be  faced,  for  the  PoUyanna  at- 
titude never  gets  you  anywhere  in  real  life.  Within  a  few 
years  the  United  States  will  certainly  lose  its  preeminence 
in  the  oil  industry,  so  far  at  least  as  domestic  supplies  are 
concerned  —  and  that  is  a  leadership  which  it  has  main- 
tained steadily  since  1857.  The  American  oil  industry  has 
built  up  great  fortunes,  and  it  has  shown  some  remarkable 
competitive  practices  —  both  of  which  features  have  been 


PETROLEUM,  NATURAL  GAS,  WATER-POWER       129 

discussed  to  the  point  of  weariness  by  legislators  and  journal- 
ists. But  it  also  did  much  to  make  American  life  easier, 
and  to  spread  our  commercial  influence  abroad.  It  did  this 
long  before  we  were  able  to  export  steel  products  success- 
fully, and  fifteen  years  ago  a  Standard  Oil  tanker  was  about 
the  only  freighter  carrying  the  American  flag  that  you  would 
see  in  a  foreign  port. 

The  American  refining  industry  is  not  doomed  to  extinc- 
tion, however,  even  though  the  supplies  of  American  pe- 
troleum are  nearing  their  end;  the  struggle  must  begin  again, 
based  on  other  sources  of  supply,  and  against  new  and  pow- 
erful opponents. 

To  the  southward  of  our  own  border  lies  the  second 
great  petroliferous  area,  so  far  as  probable  time  of  develop- 
ment is  concerned,  for  it  seems  likely  that  the  nearby  de- 
ficiencies in  United  States'  output  will  be  met  by  greatly  in- 
creased production  from  Mexico,  Venezuela  and  Colombia. 
The  fields  in  this  Caribbean  area  are  extensive,  though 
probably  not  so  large  as  the  popular  imagination  assumes, 
and  they  are  now  in  process  of  intensive  development. 
Within  a  few  years  we  may  fairly  expect  to  see  a  perfect 
flood  of  fuel  oils  strike  the  market,  whatever  may  be  the 
condition  of  the  market  at  the  time.  Just  now  there  is  a 
large  demand  for  fuel  oil,  and  it  is  assumed  that  this  de- 
mand will  increase  very  rapidly.  That  assumption  is  based 
on  the  theory  that  the  world  is  now  entering  on  a  period 
of  great  commercial  and  shipping  expansion  —  a  theory 
which  is  pleasant  but  not  necessarily  sound.  If  so,  it  will 
be  a  remarkable  recovery  from  the  losses  of  the  World 
War. 

In  discussing  Gulf  and  Caribbean  prospects,  it  is  well  to 
bear  in  mind  that  the  great  reserve  tonnage  in  that  field,  as 
in  California  and  much  of  Texas,  is  essentially  a  tonnage 
of  heavy  oils,  which  will  supply  relatively  small  proportions 
of  gasoline  and  other  light  products.  For  sources  of  these 
yve  must  still  seek  elsewhere. 


130  COAL,  IRON  AND  WAR 

For  the  future  oil  supply  of  the  world,  after  a  relatively 
short  predominance  of  the  Caribbean  region,  we  shall  prob- 
ably have  to  look  to  Asia,  and  particularly  to  the  areas  in 
eastern  Turkey  and  in  Persia.  These  we  now  find,  natur- 
ally enough,  under  the  watchful  guardianship  of  our  British 
allies.  For  the  Mesopotamian  campaign  was  not  only  a 
subject  full  of  newspaper  interest,  but  it  was  the  one  sound 
commercial  enterprise  of  the  World  War.  As  matters 
stand  now,  the  bulk  of  the  world's  probable  petroleum  re- 
serve is  supposed  to  lie  in  the  southwestern  Asia-southeast- 
ern Europe  region,  and  it  is  likely  that  each  year  in  the 
future  will  see  vast  increase  in  the  output  from  these  areas. 
The  oils  vary  in  grade,  but  the  Persian  and  some  others 
are  on  the  average  a  good  deal  lighter  than  our  own  Gulf 
coast  and  Mexican  petroleums,  a  fact  which  makes  future 
competition  still  more  difficult. 

With  the  foregoing  facts  in  mind,  we  can  get  some  idea 
of  the  future  of  the  oil  industry  in  general,  and  of  the 
American  industry  in  particular.  There  will  be  large  quan- 
tities of  petroleum  available  for  market  during  some  decades 
to  come,  but  the  flood  will  probably  reach  an  early  maximum, 
possibly  within  twenty  years.  The  United  States  will  lose 
its  rank  as  the  leading  producer  in  a  far  shorter  time,  prob- 
ably well  before  1930.  The  refining  and  marketing  indus- 
tries, which  have  been  built  up  with  so  much  care,  will  have 
to  depend  more  and  more  upon  the  use  of  imported  raw 
material.  Competition  with  foreign  oil  producers  and  re- 
finers will  yearly  become  more  difficult,  and  will  probably 
result  in  increased  attempts  to  secure  American  oil  holdings 
in  foreign  countries.  This  possibility  has  already  been 
taken  into  account,  not  only  by  Americans  but  by  others, 
and  not  only  by  individuals  but  by  governments. 

When  the  whole  matter  is  summed  up,  though  the  re- 
sults can  not  be  stated  in  exact  figures,  we  arrive  at  a  very 
definite  idea  as  to  the  limits  within  which  the  truth  lies, 


PETROLEUM,  NATURAL  GAS,  WATER-POWER       131 

For  all  practical  purposes  the  results  will  be  the  same,  so 
we  may  assume  that  of  the  known  and  probable  petroleum 
reserve  of  the  world,  at  least  two-thirds  and  perhaps  over 
four-fifths  is  now  in  the  hands  of  the  British  government 
directly,  or  of  British  corporations. 

Summary.  As  regards  petroleum,  the  chief  problems 
therefore  are  not  the  extent  to  which  petroleum  will  aid  in 
reducing  our  coal  consumption,  but  the  rapidity  with  which 
we  can  develop  some  substitute  for  petroleum  itself.  There 
are  two  lines  of  attack  here,  one  leading  in  the  direction  of 
distilling  oils  from  shales  and  the  other  in  the  direction  of 
adopting  wood  alcohol  as  a  motor  fuel.  Both  will  probably 
aid  as  the  supply  of  petroleum,  and  particularly  of  light  oils, 
becomes  scarcer.  But  this  point  of  scarcity  will  not  be 
reached,  for  the  world  in  general,  for  several  decades.  On 
the  other  hand,  so  far  as  the  United  States  is  concerned, — 
and  even  during  this  present  era  of  world  peace  we  can  not 
entirely  overlook  the  fact  that  we  are  Americans, —  the  out- 
look is  less  bright.  Barring  some  unforeseen  development 
we  may  be  in  the  embarrassing  position,  during  our  next 
war,  of  asking  British  permission  before  our  battleships  can 
go  to  sea.  The  problem  we  have  to  face  is  not  entirely 
industrial,  after  all. 

Natural  Gas 

Of  minor  importance  as  a  fuel,  except  locally  near  the 
gas-fields,  natural  gas  requires  little  consideration  in  the 
present  connection.  It  occurs  in  many  areas  all  over  the 
world,  usually  in  close  associations  with  petrojeum,  and  it 
is  a  normal  by-product  of  oil-field  development.  The  gas 
produced  is  used  extensively  in  some  localities,  as  for  ex- 
ample in  eastern  Kansas  and  western  Pennsylvania;  it  is 
wasted  scandalously  in  other  localities,  chiefly  because  there 
are  no  local  commercial  developments  which  can  use  it. 
The  relation  of  supply  to  demand  is  always  a  purely  local 


132  COAL,  IRON  AND  WAR 

question  and  must  be  considered,  In  each  case,  with  specific 
reference  to  some  given  gas  field  and  some  given  group  of 
local  industries. 

Water  Power 

The  development  of  electricity  by  means  of  water  power 
has  certain  advantages  which  are  obvious,  even  to  the  dullest 
of  observers.  They  are  so  obvious,  in  fact,  that  they  should 
be  subject  to  suspicion  on  that  very  account,  for  there  are 
few  simple  and  plain  propositions  which  are  true. 

The  advantage  which  appears  immediately  is  that  our 
water  power  is  inexhaustible;  that  the  streams  will  always 
be  there,  so  that  the  power  will  not  become  scarcer  in  the 
future,  like  coal.  The  second  obvious  advantage  is  as  re- 
gards operating  costs,  for  clearly  these  are  very  low  per  unit 
of  power,  once  the  plant  is  installed. 

Starting  with  these  two  points  of  advantage,  which  do 
exist,  we  are  apt  to  move  forward  onto  less  safe  ground. 
The  intermediate  conclusions  usually  reached  are,  that 
hydro-electric  power  is  always  cheap  per  unit,  as  compared 
with  power  derived  from  coal,  and  that  these  unit  costs 
are  likely  to  decrease  rather  than  Increase  as  the  plant  grows 
older  and  larger.  Finally,  making  a  still  more  unsafe  step, 
the  final  conclusion  commonly  takes  the  form  of  saying  that 
dwindling  coal  suppHes  will  be  made  up  by  water  power.  If 
this  were  indeed  the  case,  no  industrial  nation  need  have  any 
fears  as  to  its  future.  Unfortunately,  however,  neither  the 
intermediate  or  the  final  conclusions  are  true. 

At  present,  and  for  many  years  previous,  it  has  been  dif- 
ficult to  find  streams  on  which  hydro-electric  power  can  be 
developed  and  transmitted  cheaply  enough  to  compete  with 
electric  plants  using  coal  as  a  source  of  power.  It  takes  a 
very  large  water  power,  or  one  very  well  located  with  re- 
gard to  present  or  possible  industrial  development,  to  make 
the  matter  definitely  one-sided.  In  most  cases  the  decision 
will  be  very  close,  and  usually  in  favor  of  coal.     There  are 


PETROLEUM,  NATURAL  GAS,  WATER-POWER       133 

of  course  areas  and  countries  otherwise  situated  than  we  are 
in  this  regard.  Brazil,  for  example,  may  fairly  look  for- 
ward to  manufacturing  development  based  on  hydro  electric 
power,  because  In  Brazil  the  water  powers  are  largely  lo- 
cated within  reasonable  distance  of  the  settled  portions  of 
the  country,  and  because  Imported  coal  Is  usually  very  dear. 
There  Is  a  further  error  In  assuming  that  electricity  is  an 
exact  replacement  for  coal,  but  In  this  case  the  matter  has 
two  sides.  In  considering  the  future  of  the  chemical  in- 
dustries, which  seem  likely  to  furnish  a  more  important  part 
of  our  industrial  development  than  they  have  as  yet.  It  is 
found  that  the  more  Important  chemical  industries  are  rela- 
tively large  users  of  both  heat  and  power.  This  Implies 
that  the  possIblHty  of  securing  cheap  electricity,  or  cheap 
coal,  or  both,  will  have  an  Important  effect  on  the  future 
location  and  growth  of  the  heavy  chemical  industries.  But 
in  this  regard  there  are  points  of  difference  to  be  kept  in 
mind.  In  many  Industries,  where  power  requirements  are 
^he  main  things,  the  source  of  the  power  is  of  less  importance 
than  Its  steadiness  and  cheapness,  and  the  choice  between 
coal  and  electricity  will  in  such  cases  depend  on  these  com- 
mercial factors.  But  in  other  Industries  this  is  not  the  case, 
for  in  addition  to  the  power  requirements  there  are  other 
things  to  be  considered.  In  many  manufactures,  for 
example,  heat  must  be  supplied  in  the  course  of  the  chemical 
process,  and  in  some  of  these  cases  there  are  technical 
reasons  for  choosing  between  the  two.  The  coal,  for 
example,  may  be  needed  for  its  reducing  power,  as  well  as 
for  its  heat  —  and  the  blast  furnace  furnishes  a  good 
example  of  this.  On  the  other  hand,  the  process  may  need 
electricity  for  electrolytic  dissociations  as  well  as  for  its 
heating  and  power  value.  The  different  chemical  industries 
differ  widely  in  these  particular  respects,  and  their  require- 
ments are  so  divergent  that  mere  mention  of  these  possi- 
bilities is  all  that  is  possible  at  present.  Enough  has  been 
said,  however,  to  suggest  that  the  choice  between  hydro-elec- 


134  COAL,  IRON  AND  WAR 

trie  and  coal  power  is  not  always  based  merely  on  relative 
cost  or  mechanical  efficiency. 

Electric  power  does  not  therefore  serve  as  an  exact  re- 
placement for  coal,  and  though  it  is  likely  to  develop  greatly 
in  the  future,  its  applications  will  probably  take  place  chiefly 
In  fields  and  in  regions  which  are  not  seriously  entered  by 
coal  to-day.  Future  hydro-electric  developments,  therefore, 
will  have  little  if  any  effect  in  prolonging  the  life  of  our  coal 
supply,  or  in  keeping  down  the  future  prices  of  that  product. 


CHAPTER  XI 
IRON  ORE  SUPPLIES  OF  THE  WORLD 

Next  in  importance  to  the  coal  necessary  to  heat  our  furn- 
aces and  drive  our  engines  in  this  modern  industrial  age 
comes  the  metal  produced  in  these  furnaces  and  used  in 
building  both  the  engines  and  the  tools  which  some  of  them 
will  operate.  After  considering  the  question  of  fuel  sup- 
plies we  turn  naturally  to  the  nearly  related  problem  of  iron 
ore  reserves. 

Considered  merely  as  a  chemical  element,  iron  is  very 
widely  diffused  among  the  rocks  and  soils  all  over  the  earth, 
making  up  somewhat  over  four  per  cent,  of  the  earth's  mass. 
But  if  we  had  to  depend  on  such  sources  of  iron  as  ordinary 
rocks,  metallic  iron  would  be  a  very  rare  and  dear  product 
indeed,  and  not  the  very  common  and  cheap  metal  with 
which  we  are  acquainted.  For  making  iron  in  a  commercial 
way  we  must  depend  on  finding  comparatively  rich  iron 
ores,  in  deposits  large  enough  to  be  worth  working,  and 
located  in  such  places  as  to  permit  transportation  to  some 
iron  smelting  region.  In  the  very  early  days  of  the  iron  in- 
dustry, a  century  or  more  ago,  the  chief  insistence  was  on  the 
richness  of  the  ores,  for  the  quantity  that  could  be  used  in 
the  small  charcoal  furnace  or  forge  of  these  days  was  very 
small  —  a  matter  of  a  few  tons  of  ore  a  day,  or  even  less 
for  the  forges.  And  since  in  those  days  there  was  usually 
no  grouping  of  units,  the  single  furnace  was  all  that  need 
be  considered.  The  processes  available,  too,  were  crude; 
and  even  when  a  very  rich  ore  was  used  the  losses  in  slag 
were  very  large.  To-day,  with  furnace  groups  needing 
hundreds  of  thousands  of  tons  of  ore  per  year,  the  insistence 
is  on  quantity,  and  a  deposit  containing  a  few  thousand  tons, 
even  of  very  rich  ore,  is  of  no  commercial  value  whatever, 

135 


136  COAL,  IRON  AND  WAR 

Tonnage  and  transportation  are  therefore  prime  requisites; 
quality  is  still  important,  for  it  affects  the  cost  of  the  pro- 
duct, but,  within  limits,  it  is  less  important  than  are  the 
other  two  factors. 

At  our  present  stage  of  industrial  development,  iron  ores 
have  acquired  great  technical  and  commercial,  importance, 
and  they  are  in  addition  becoming  objects  of  political  in- 
terest, both  nationally  and  internationally.  A  large  num- 
ber of  factors  determine  the  importance  and  the  utilization 
of  different  iron  ore  deposits,  and  the  questions  which  arise 
can  not  be  discussed  here  in  any  detail.  We  can  only  state 
briefly,  without  explanation,  some  of  the  facts  that  have  to 
be  considered  in  the  present  connection,  and  to  refer  to  the 
volume  below  noted  ^  for  further  details.  Unless  otherwise 
noted  the  tonnage  estimates  and  other  data  here  used  are 
taken  from  that  volume. 

Total  iron-ore-reserves.  As  in  the  case  of  coal,  there 
have  been  at  intervals  serious  inquiries  as  to  the  possibility 
that  the  iron  ore  supplies  of  different  industrial  nations  were 
nearing  exhaustion,  and  these  have  led  at  different  times  to 
the  preparation  of  estimates  of  reserve  ore  tonnages. 
There  has  been  also,  in  the  United  States  at  least,  another 
factor  at  work,  which  has  led  to  even  more  serious  and  care- 
ful studies  along  the  same  line.  This  newer  and  more  press- 
ing factor  has  been  the  charge  that  iron  ore  supplies  are  be- 
ing monopolized  by  one  or  more  great  corporations.  The 
charge,  of  course,  could  be  made  without  any  preliminary  in- 
vestigation, but  its  refutation  required  facts. 

Altogether,  in  one  way  or  another,  there  are  now  sufficient 
data  available  for  forming  a  pretty  definite  idea  as  to  the 
iron  ore  tonnage  known  to  exist  in  at  least  three  of  the  con- 
tinents. Furthermore,  we  are  able  to  make  some  fairly 
precise  estimate  as  to  the  probable  tonnage  of  the  remain- 
ing three.     There  are  of  course  wide  chances,  both  for  error 

1  Eckel,   E.    C.     "Iron   Ores;   Their   Occurrence,   Valuation   and   Control." 
New  York,  1914. 


IRON  ORE  SUPPLIES  OF  THE  WORLD  137 

and  for  difference  of  opinion,  in  regard  to  such  estimates, 
but  it  must  be  recalled  that  we  are  not  dealing  with  a  very 
small-scale  product,  and  that  the  error  would  have  to  be  very 
large  indeed  before  it  would  vitiate  any  of  the  conclusions 
we  might  draw  from  the  data. 

In  any  case,  the  final  estimate  for  the  known  iron  ore  ton- 
nages of  the  three  best-known  continents  gives  results  as  fol- 
lows: 

Equivalent  in 
Iron  ore  tonnage  metallic  iron 

North  America 15,000,000,000  6,455,000,000 

South  America 8,000,000,000  5,000,000,000 

Europe   12,000,000,000  4,735,000,000 


Total  tonnage. . .     35,000,000,000        16,190,000,000 

This  gives  us  a  very  large  total,  some  35  billion  tons,  as 
compared  with  an  annual  iron-ore  requirement,  in  all  the 
world,  amounting  to  about  160  million  tons.  If  the  world's 
requirements  did  not  rise,  in  future,  above  those  of  1913, 
which  was  the  last  year  of  heavy  demand,  the  three  conti- 
nents above  noted  would  be  able  to  fill  the  demand  for  the 
next  two  hundred  years. 

But  in  addition  to  the  known  ores  of  Europe  and  the  two 
Americas,  it  must  be  recalled  that  we  have  three  more  con- 
tinents to  draw  on  for  the  future.  If  we  assume  that  they 
will  yield  iron  ore  about  in  proportion  to  their  land  areas, 
we  arrive  at  a  probable  ore  tonnage  for  Asia,  Africa  and 
Australia  combined  of  some  57  billion  tons. 

Taking  both  sets  of  figures  into  consideration,  it  seems 
probable  that  we  can  count  safely  on  a  total  world  tonnage 
of  iron  ore  amounting  to  some  92  billion  tons,  or  over  five 
hundred  years  supply  at  the  present  rate  of  utilization.  It 
has  previously  been  said  that  slight  errors  would  make  no 
serious  change  in  the  conclusions  drawn,  and  the  justice  of 
this  statement  can  now  be  appreciated,,  in  view  of  the  ton- 
nage figures  at  which  we  arrive. 


138  COAL,  IRON  AND  WAR 

If  we  could  drop  the  question  at  this  stage  the  results 
would  be  satisfactory  enough,  for  surely  a  five  hundred  year 
supply  of  good  ore  would  remove  the  more  pressing  fears 
as  to  the  future.  Unfortunately,  however,  there  are  two 
factors  yet  to  be  considered,  both  of  which  operate  to  curb 
our  optimism.  The  one  most  commonly  brought  to  notice 
is  the  possibility  of  steady  future  increase  in  the  annual  re- 
quirements for  iron  ore.  The  other  is  the  certainty  that  our 
iron  ores,  and  consequently  our  finished  iron  and  steel,  will 
cost  more  in  future  than  they  have  in  the  past.  Both  of 
these  difficulties  are  very  real,  and  demand  consideration 
here. 

As  for  the  first,  we  have  the  fact  that  for  over  a  hundred 
years  the  iron  ore  output  of  the  world  has,  on  the  average, 
increased  about  four  per  cent,  over  the  output  of  the  year 
preceding.  This  is  of  course  due  to  increased  demand  for 
pig  iron,  and  if  kept  up  at  this  rate  it  would  imply  that  in  a 
hundred  years  from  now  the  annual  ore  requirement  would 
be  well  over  one  thousand  million  tons,  so  that  there  are 
really  about  two  hundred  years  of  good  ore  supply.  That 
would  place  the  iron  ore  reserve  on  about  the  same  basis 
as  the  coal  reserve  —  a  matter  which  two  centuries  would 
place  in  a  very  serious  position  provided  the  recent  rate  of 
industrial  progress  continues.  This  last  question  is  one 
that  will  be  discussed  later. 

The  second  point  of  serious  interest  regarding  future  ore 
supplies  is  one  that  affects  cost  of  iron,  rather  than  quantity 
of  ore.  It  arises  from  the  fact  that  in  the  total  reserve 
estimates  there  are  many  thousand  miUion  tons  which  are 
so  located  geographically  that  they  can  not  enter  the  market 
to-day,  and  that  they  will  not  be  able  to  enter  it  until  pig- 
iron  prices  are  much  higher  than  this  generation  has  been 
accustomed  to  paying.  The  result  is  that  the  whole  ore 
supply  of  the  near  future  will  be  drawn,  in  annually  increas- 
ing tonnage,  from  a  relatively  small  group  of  ore  deposits. 


IRON  ORE  SUPPLIES  OF  THE  WORLD         139 

Some  of  these  are  already  showing  signs,  not  of  exhaus- 
tion, but  of  increasing  scarcity.  This  is  clearly  indicated 
by  the  fact  that  the  average  grade  of  ore  shipped  to  our 
furnaces  falls  off  a  little  each  year,  or  at  least  each  few 
years.  The  rate  at  which  the  average  ore  grade  lowers, 
can  be  determined  with  some  approach  to  exactness.  It 
amounts,  for  the  northern  United  States,  to  a  fall  of  about 
half  of  one  per  cent,  a  year  in  the  metallic  iron  content  of  the 
average  ore  used.  This  does  not  seem  large,  stated  in 
percentages,  but  it  means  an  increase,  other  things  being 
equal,  of  pig  iron  and  steel  costs  year  after  year. 

There  is  a  further  matter  to  be  considered,  and  this  is 
industrially  the  most  serious.  It  relates  not  to  the  exhaus- 
tion of  the  world's  ore  supply  en  masse ^  but  to  the  relatively 
rapid  exhaustion  of  certain  portions  of  that  supply,  so  that 
certain  given  iron  and  steel  districts  will  in  the  near  future 
operate  at  a  disadvantage  as  compared  with  other  districts 
of  which  they  have  hitherto  been  competitors.  This  can 
best  be  understood,  if  before  discussing  its  results,  we 
examine  the  manner  in  which  the  world's  total  iron  ore  re- 
serve is  localized  geographically. 

The  great  ore  regions.  In  a  previous  tabulation  it  was 
shown  that  the  iron-ore  reserves  of  Europe  and  the  two 
Americas  aggregated  some  35  billion  tons.  This  tonnage 
is,  however,  not  equally  scattered  over  the  surface  of  these 
three  continents,  but  is  on  the  contrary  relatively  concen- 
trated. By  far  the  bulk  of  the  total  known  reserve  Is 
found  in  one  of  a  very  small  number  of  great  ore  districts. 
For  our  present  purposes  it  may  be  assumed,  with  a  reason- 
able approach  to  exactness,  that  over  four-fifths  of  the 
known  reserve  tonnage  is  contained  in  one  of  ten  ore  fields 
or  regions.  In  the  tabulation  on  the  following  page  the 
reserve  tonnage  is  given  for  each  district,  as  well  as  the  cur- 
rent rate  at  which  this  reserve  has  been  drawn  on  during 
recent  years  of  normal  trade.     The  last  column,  arrived  at 


I40  COAL,  IRON  AND  WAR 

by  simple  division,  gives  the  number  of  years  for  which  this 
draft  could  continue  before  exhausting  the  supply  of  any 
given  ore  district. 

Ore  reserve,  Annual  shipments,  Duration, 

Region                                    millions  of  tons  millions  of  tons  years 

Brazil    7500  none 

Lorraine    5600  40  140 

Newfoundland 4000  1  4000 

Cuba 3000  2  1500 

Lake  Superior,  U.  S 2500  55  45 

Southern  U.  S 2000  6  333 

Scandinavia 1500  8  188 

Great  Britain 1300  16  81 

Spain 700  10  70 

Northeastern  U.  8 600  2  300 

It  will  be  seen  immediately  that  this  comparison  puts  the 
ore  situation  In  a  new  light.  If  our  present  rate  of  ship- 
ments continue,  some  of  the  best  known  of  the  world's  Iron 
ore  regions  have  not  a  century  to  live.  If  the  shipments 
Increase  In  the  future  as  they  have  in  the  past,  it  is  not  a 
question  of  centuries  but  of  decades  for  these  districts. 
The  result  will  be  of  course,  not  that  the  world's  steel  in- 
dustry will  come  to  an  end  soon,  but  that  there  will  be  great 
changes  In  the  source  of  its  ores.  These  changes  will  be 
accompanied  by  other  commercial  developments  In  new 
regions,  and  by  increasing  cost  of  ore,  which  in  the  long 
run  means  higher  priced  Iron  and  steel. 

The  iron  ore  situation ;  summary.  In  the  present  chap- 
ter we  have  gone  over  the  leading  facts  relative  to  the  iron 
ore  supplies  of  the  world,  In  so  far  as  these  facts  have  any 
direct  bearing  on  our  general  subject  —  the  development 
and  future  of  industrialism  and  of  world  leadership.  The 
chief  points  of  interest  developed  along  these  lines  may 
perhaps  be  fairly  sumarlzed  as  follows: 

I.  There  is  no  danger  of  exhaustion  of  our  Iron  ore  sup- 
plies for  a  very  long  time  to  come.     At  our  present  rate  of 


IRON  ORE  SUPPLIES  OF  THE  WORLD         141 

consumption  the  known  reserves  would  last  for  many  hun- 
dreds of  years.  At  our  recent  rate  of  increased  demand, 
they  will  last  for  several  hundred  years. 

2.  As  demand  continues,  even  if  it  should  not  increase, 
we  will  have  to  rely  to  an  increasing  extent  on  using  poorer 
and  more  distant  ores.  This  involves  increasing  cost  per 
unit  of  metal  produced.  Other  things  being  equal,  the  cost 
of  iron  and  steel  will  rise  steadily  each  decade. 

3.  The  draft  on  certain  leading  regions  is  even  now  very 
great  in  proportion  to  their  reserve  tonnage.  This  will 
lead,  in  the  near  future,  to  great  shifts  In  manufacturing 
locations.  Some  of  these  shifts  will  be  within  a  country, 
building  up  new  manufacturing  regions. 

4.  Other  shifts  which  may  be  anticipated  will  be  on  a 
larger  scale,  affecting  the  relative  ranks  of  various  countries 
in  world  trade  and  leadership.  These  effects  of  Increasing 
ore  scarcity  will  have  to  be  considered  In  connection  with 
facts  already  presented  as  to  coal  supplies. 

The  foregoing  general  statements  will  be  recurred  to 
later,  in  Chapter  XXV  when  we  come  to  discuss  the  future 
of  world  competition  and  leadership. 


CHAPTER  XII 

THE  SUPPLY  OF  THE  PRECIOUS  METALS 

In  discussing  gold  and  silver  we  have  to  deal  with  metals 
which  are  not  only  of  great  importance  as  raw  materials  of 
manufacture,  but  which  have  a  very  special  place  in  our 
economic  world  as  being  the  bases  of  all  modern  currency 
systems.  Their  importance  in  this  latter  sphere,  as  coinage 
metals,  is  indeed  so  great  that  we  often  overlook  the  fact 
that  a  very  large  proportion  of  the  world's  gold  and  silver 
output  does  not  enter  the  currency  at  all,  but  is  taken  up  for 
decorative  or  other  industrial  purposes.  This  fact,  as  we 
shall  see  later,  contributes  to  render  very  indefinite  the  re- 
lation between  gold  supply  and  prices. 

The  older  gold  supplies.  Prior  to  the  discovery  of 
America,  the  civilized  world  was  living  very  largely  upon 
the  gold  and  silver  which  remained  to  it  from  the  accumula- 
tions of  far  earlier  ages.  In  ancient  times  slave  and  cap- 
tive labor,  worked  mercilessly  on  uneconomic  deposits,  had 
produced  in  the  course  of  centuries  quite  a  respectable  stock 
of  the  precious  metals.  Even  allowing  for  the  relative 
poorness  of  forced  labor,  you  could  work  a  very  poor  mine 
indeed  if  you  did  not  have  to  give  your  workman  anything 
except  food,  if  you  could  work  him  until  he  dropped,  and 
if  you  could  steadily  replace  the  exhausted  working  force  by 
merely  going  out  and  catching  a  few  more  barbarians.  On 
these  accounts  the  ancients  were  able  to  work  gold  deposits 
which  now  are  useless  to  us,  in  Europe,  Asia  and  Africa. 
They  could  not  work  anything  which  required  machinery  or 
technical  appliances;  but  they  could  work  anything  which 
merely  required  labor.  So,  whenever  we  come  across 
ancient  mine  workings  for  the  precious  metals,  we  are  apt 

142 


THE  SUPPLY  OF  THE  PRECIOUS  METALS      143 

to  find  that  they  are  of  too  low  grade  for  even  our  present 
methods. 

Another  error  as  to  ancient  conditions  is  introduced  by 
the  fact  that  wealth  was  in  those  times  excessively  concen- 
trated, as  compared  with  recent  periods.  Such  things  as 
gold  and  silver  were  carefully  hoarded,  passed  from  hand 
to  hand  by  conquest,  and  finally  gravitated  into  the  posses- 
sion of  a  very  few  people  in  several  conquering  nations. 
During  later  periods  they  passed  into  the  hands,  in  large 
part,  of  a  very  durable  and  practically  universal  institution, 
the  Church.  If  we  recall  that  at  the  time  of  the  Reforma- 
tion the  Church  owned  absolutely  half  the  landed  area  of 
England  we  shall  get  some  idea  of  the  sort  of  concentra- 
tion of  ownership  that  was  probably  taking  place  with  re- 
gard to  the  gold  and  silver  supply  of  the  Christian  world. 
Now  all  this  concentration  did  not  of  course  increase  the 
total  supply,  but  it  tended  to  make  it  very  obvious  and  im- 
pressive. Even  to-day  we  tend  to  get  an  unfair  idea  of  the 
number  of  precious  stones  in  the  world  when  we  see  a  muni- 
tion manufacturer's  wife  on  exhibition.  So  in  older  times 
a  few  secular  rulers  and  a  few  ecclesiastical  dignitaries,  the 
profiteers  of  those  times,  had  known  hoards  of  precious 
metals  which  tended  to  make  the  world  seem  richer  than  it 
really  was.  Perhaps  we  can  get  a  better  idea  of  the  facts 
if  we  recall  that,  according  to  the  best  available  estimates, 
all  of  Europe  possessed  at  the  time  America  was  discovered 
less  than  one  hundred  million  dollars  worth  of  gold  in  any 
form.  This  represented  what  was  left  from  six  thousand 
years  of  recorded  search  for  gold.  For  comparison  we 
may  say  that  this  amount  is  about  equal  to-day  to  an  ordin- 
ary year's  output,  not  of  the  whole  world,  but  of  South 
Africa  or  Australia  or  America,  separately. 

The  American  treasures.  With  the  discovery  of  Amer- 
ica, this  condition  of  gold-poverty  was  sharply  changed. 
Within  twenty  years  the  New  World  had  doubled  the  gold 
supply  available  for  European  use;  and  in  each  twenty  years 


144  COAL,  IRON  AND  WAR 

thereafter  another  hundred  million  dollars  worth  of  the 
precious  metal  was  shipped  to  Spain  and  Portugal.  Much 
of  this  gold  reached  other  countries,  either  directly  by  piracy 
or  indirectly  by  trade.  Along  with  the  new  gold  came  new 
silver,  not  in  the  present  coining  ratio  but  in  quantities  per- 
haps fifty  times  as  great  as  that  of  gold.  The  flood  of  the 
precious  metals  was  such  that,  from  the  overflow  into  Eng- 
land, EHzabeth  was  able  to  reestablish  a  sound  coinage  in 
place  of  the  scandalously  debased  issues  of  her  father. 

As  the  new  gold  actually  entered  coinage  systems,  and 
became  an  actual  factor  in  trade,  prices  of  all  commodities 
rose  in  all  countries  which  were  affected  by  the  new  con- 
dition. This  is  one  of  the  two  clear  instances  where  a  new 
gold  discovery  has  had  this  effect.  The  other  was  in  the 
middle  of  the  nineteenth  century,  as  we  shall  see  later.  In 
all  other  cases  the  evidence  is  by  no  means  clear,  as  we 
shall  also  see  later.  But  before  going  on  to  this  con- 
troverted question  it  will  be  well  to  see  what  actual  and  im- 
mediate effects  do  come  unquestionably  from  new  gold  dis- 
coveries. 

The  initial  local  effects.  There  is,  of  course,  an  im- 
mediate and  very  direct  influence  exerted  by  a  new  dis- 
covery of  the  precious  metals,  but  particularly  of  gold,  on 
commercial  activity  and  prices.  It  has  been  pointed  out, 
most  forcibly  perhaps  by  De  Launay,  though  earlier  recog- 
nized by  others,  that  men  will  seek  for  and  extract  gold 
with  an  energy  and  disregard  of  expense  utterly  dispropor- 
tionate to  the  value  of  the  actual  product.  It  is  indeed  con- 
sidered probable  enough  that,  were  it  possible  to  assemble 
prospecting  and  mining  costs  for  all  the  gold  that  has  been 
extracted  throughout  the  world  from  1849  ^^  ^^^  present 
day,  we  would  find  that  it  had  averaged  in  actual  cost  far 
above  the  $20.67  P^^  ^"^  ounce,  troy,  which  is  its  com- 
mercial value.  This,  taken  in  connection  with  the  very 
characteristic  rushes  to  a  new  gold  district,  indicate  very 
clearly  that  discoveries  of  new  sources  of  gold  supply  have 


THE  SUPPLY  OF  THE  PRECIOUS  METALS      145 

a  very  Immediate  and  direct  effect  on  prices  and  activity. 
Though  this  immediate  effect  on  prices  is  commonly  local 
and  not  general,  the  increase  in  activity  may  spread  far 
beyond  the  region  of  the  new  goldfields,  and  if  the  discovery 
be  important  enough,  the  effects  may  be  shown  over  a  long 
period  of  time  and  with  very  striking  final  results.  The 
rapid  development  of  California,  Australia  and  South 
Africa  after  important  gold  discoveries  are  cases  in  point. 
In  all  of  these  the  development  was  incited  and  for  a  time 
guided  by  gold.  Later,  in  all  three  cases,  the  development 
was  finally  justified  by  other  conditions,  so  that  in  the  cases 
of  California  and  Australia  at  least  the  present  gold  pro- 
duction is  a  relatively  unimportant  item  in  the  wealth  of  the 
regions.  But  this  does  not  alter  the  fact  that  their  develop- 
ment was  originally  caused  and  forced  by  discoveries  of 
gold. 

In  the  case  of  silver  the  effects  are  not  so  Immediate  or 
so  striking,  owing  to  the  fact  that  in  most  cases  silver  is  so 
closely  associated  with  other  metals  that  Its  metallurgy  Is 
complicated,  and  the  bulk  of  It  really  appears  as  a  by-pro- 
duct of  lead  or  copper  mining  and  metallurgy.  But  even 
in  the  case  of  silver  we  have  examples,  as  during  the  original 
building  up  of  Nevada,  of  conditions  favoring  the  small 
miner  and  therefore  causing  a  rush  to  the  new  district.  Our 
classic  examples,  of  course,  are  of  greater  age  and  of  some- 
what different  character,  for  in  the  cases  of  the  Spanish 
conquests  of  Mexico  and  Peru  the  rush  to  the  newly  found 
silver  regions,  and  their  later  development,  were  originated 
and  carried  on  by  a  great  state,  acting  through  organized 
military  and  political  powers. 

Broader  effects  on  the  price-level.  But  entirely  aside 
from  the  Immediate  and  local  effects  of  the  discovery  of 
new  sources  of  gold  or  silver,  there  are  much  more  import- 
ant and  enduring  effects  upon  both  prices  and  commercial 
and  industrial  activity.  These  arise  from  the  fact  that 
these  particular  metals  have  from  time  Immemorial  been, 


146  COAL,  IRON  AND  WAR 

not  merely  articles  of  commerce,  but  coinage  metals.  They 
are  the  final  basis  of  value,  against  which  we  fix  the  price 
of  all  other  commercial  products. 

This  being  the  case,  it  is  clear  that  we  might  fairly  expect 
to  find  that  great  changes  in  the  current  supply  of  the  pre- 
cious metals  would  effect  changes  in  the  general  level  of 
prices  and  in  the  general  degree  of  commercial  and  indus- 
trial activity.  We  may  indeed  put  the  matter  in  more  pre- 
cise form  by  saying  that:  Other  things  being  equal,  an  in- 
crease in  the  production  of  the  precious  metals  will  tend  to 
cause  a  rise  in  the  general  level  of  prices,  and  an  increase 
of  commercial  activity,  while  a  decrease  in  gold  and  silver 
production  will  tend  to  cause  a  general  fall  in  prices  and  a 
decrease  in  trade  activity. 

The  two  qualifications  introduced  into  the  preceding  state- 
ment— "  other  things  being  equal  "  and  "  tend,"  are  how- 
ever very  important,  and  must  be  considered  in  some  detail 
before  we  can  go  on  to  further  discussion  of  the  precious 
metal  supply  itself.  The  other  things  which  prevent  the 
tendency  from  being  a  constant,  direct  and  immediate  effect 
are  suggested  if  we  state  the  case  in  the  following  inverse 
order,  limiting  attention  to  gold  in  order  to  avoid  con- 
sideration of  bimetallism. 

Any  increase  in  the  annual  output  of  gold  would  cause  an 
immediate  and  practically  corresponding  rise  in  general 
prices  provided  that 

1.  Gold  were  the  sole  monetary  basis  and  that  no  credit 
instruments  (bills,  notes,  checks,  acceptances,  etc.)  were  in 
commercial  use. 

2.  All  the  annual  gold  output  were  employed  in  coinage, 
and  there  Avas  no  demand  for  gold  as  a  commodity  (i.e. 
for  jewelry,  industrial  uses,  etc.). 

3.  There  were  no  preexisting  stock  of  gold,  so  that  the 
output  of  any  given  year  or  other  short  period  would  be 
decisive. 

It   does  not  take  long  consideration  to   see   that,   as  a 


THE  SUPPLY  OF  THE  PRECIOUS  METALS       147 

matter  of  fact,  not  one  of  these  three  necessary  conditions 
holds  true  at  any  time  in  civilized  countries  of  modern  type. 
Credit  instruments  are  becoming  increasingly  important,  as 
compared  with  gold  coin,  and  even  though  credit  may  in 
the  last  analysis  be  based  upon  a  gold  reserve,  the  connec- 
tion is  not  direct  and  unqualified.  Furthermore,  there  is  a 
very  large  proportion  of  the  gold  mined  each  year,  probably 
well  over  half  of  it,  which  does  not  reach  any  mint,  but  goes 
directly  into  commercial  utilizations.  Finally,  the  existing 
stock  of  gold  is  very  large,  so  that  the  additions  of  any  one 
year  or  series  of  years  do  not  represent  a  great  change  in 
percentage. 

With  all  three  conditions  unfulfilled,  purely  theoretical 
arguments  as  to  the  necessary  and  direct  effects  of  gold  out- 
put on  prices  lose  much  of  their  force.  It  will  be  more 
satisfactory,  however,  if  we  abandon  theory  entirely  and 
make  a  direct  comparison  between  gold  output  and  prices 
for  a  long  series  of  years,  for  which  we  have  fortunately 
ample  data. 

The  test  of  experience.  In  the  diagram  presented  here- 
with (Fig.  6),  an  attempt  is  made  to  submit  the  theoretical 
question  to  the  test  of  experience.  In  this  diagram  the 
solid  line  represents  the  annual  gold  production  of  the 
world,  expressed  in  hundred  millions  of  dollars,  as  given 
in  the  reports  of  the  Director  of  the  United  States  Mint, 
for  the  period  1800  to  19 10  inclusive.  The  broken  line 
represents  the  course  of  average  prices  during  the  same 
period,  the  figures  used  being  the  combined  Jevons-Sauer- 
beck  index  numbers,  as  stated  by  Layton.^  The  following 
points  seem  to  be  suggested  by  this  diagram. 

I.  During  the  period  covered,  of  over  a  century,  the 
general  course  of  prices  has  been  downward,  with  a  maxi- 
mum in  1809  ^^^  ^  minimum  in  1897.  At  the  close  of  the 
period  prices  were  less  than  half  as  high  as  at  its  com- 

1  Layton,  W.  T.    " An  Introduction  to  tie  Study  of  Prices."     London,  1912, 
p.  116. 


148 


COAL,  IRON  AND  WAR 


mencement.  During  the  same  period  the  annual  gold  out- 
put has  increased  almost  steadily,  with  a  minimum  about 
1 8 15  and  a  temporary  maximum  in  19 10.  At  the  close  of 
the  period  the  annual  gold  output  was  over  forty  times  as 
much  as  at  its  commencement.  In  place  of  there  being  a 
general  correspondence,  during  this  century  of  modern  in- 


^ 


1-^/^ 


^s 


^10 


^2i 


i-ic. 


\m 


o        o 


Fig.  6.    Prices  and  gold  output,  1800-19x0 


dustrialism,  between  the  course  of  prices  and  the  output  of 
gold,  there  was  in  fact  a  very  violent  disparity.  Perhaps  it 
would  be  fairest  to  say  that  even  3.  flood  of  gold  was  unable 
to  prevent  a  general  fall  in  prices. 

2.  If,  instead  of  treating  the  century  as  a  whole,  we 
consider  it  in  three  periods,  the  results  are  worthy  of  con- 
sideration. The  first  period  is  from  1800  to  1848,  during 
which  prices  generally  fell;  while  the  gold  output  after 
about  1 815  rose  steadily  under  the  influence  of  the  new 


THE  SUPPLY  OF  THE  PRECIOUS  METALS       149 

output  from  Russia  and  Siberia.  This  rise  in  gold  output, 
though  we  now  look  upon  it  as  trifling  by  contrast  with 
later  discoveries,  more  than  tripled  the  annual  rate  of  gold 
production.  For  this  period  of  half  a  century,  therefore, 
the  evidence  seems  to  be  directly  against  any  important  in- 
fluence of  gold  output  on  prices. 

3.  During  the  second  period,  from  1848  to  about  1884, 
there  is  a  rough  general  correspondence  between  gold  and 
prices.  The  gold  output  rose  sharply,  on  the  Californian  and 
Australian  discoveries,  so  that  around  i860  it  was  perhaps 
five  or  six  times  as  great  as  in  1845.  Prices  rose,  from 
1849  to  1^57)  almost  forty  per  cent.  Again,  prices 
reached  a  high  point  in  1873,  and  declined  from  then  steadily 
to  1897,  while  gold  output  declined  also  from  a  high  in 
1878  to  a  low  in  1873.  Prices  therefore  started  to  fall  five 
years  before  the  gold  output  fell  off  —  a  singular  case  of 
prescience  —  and  continued  their  fall  for  fourteen  years 
after  the  gold  output  had  commenced  a  still  more  violent 
rise. 

4.  Finally,  in  the  last  pre-war  period,  prices  rose  about 
thirty  per  cent,  from  1897  to  19 10;  while  gold  output  in- 
creased over  fourfold  in  its  rise  from  1887  to  191  o.  The 
further  violent  rise  in  prices  during  the  Great  War  has,  it 
will  generally  be  admitted,  no  relation  whatever  to  gold 
output. 

Summary  of  results.  Having  considered  the  effects  of 
precious  metal  output  on  prices,  both  from  a  purely  theo- 
retical standpoint  and  in  the  light  of  the  world's  actual  ex- 
perience, it  will  be  of  advantage  to  summarize  the  results 
of  these  two  lines  of  study.  The  following  conclusions, 
limited  enough  it  will  be  seen,  seem  to  be  justified. 

The  discovery  of  large  new  precious  metal  deposits,  and 
particularly  of  placer  deposits  of  gold,  acts  powerfully  to 
force  rapid  development  of  new  territory.  Both  directly 
and  indirectly  it  contributes  toward  a  rise  in  prices  and  in- 
dustrial activity.     At  first  these  effects  are  local,  shown  in 


150  COAL,  IRON  AND  WAR 

the  regions  near  the  discovery,  but  If  the  output  is  import- 
ant enough,  they  finally  exert  a  wider  Influence.  Under 
particularly  favorable  conditions  they  may  finally  Influence 
world  activity  and  prices  for  a  time.  The  influence  thus 
exerted  is  in  part  purely  psychologic,  owing  to  the  drawing 
power  of  gold;  it  Is  in  part  due  to  the  free  expenditure  of 
the  newly  rich;  its  extent  and  duration  depend  largely  upon 
the  real  value,  other  than  for  gold,  of  the  territories  de- 
veloped. 

The  increase  in  gold  output,  once  the  period  of  discovery 
is  over,  has  little  or  no  effect  on  prices,  save  in  so  far  as 
new  gold  enters  the  monetary  systems  of  the  world.  Even 
this  effect  tends  to  decrease  as  we  become  more  used  to 
credit  instruments  in  place  of  gold,  and  as  the  existing  coined 
stock  of  gold  increases.  The  extent  to  which  the  annual 
output  is  drawn  into  mints  is  not  determined  ordinarily  by 
the  amount  of  the  output,  but  by  other  considerations. 

Finally,  a  general  rise  in  prices,  by  whatever  process 
caused,  acts  in  the  long  run  as  a  powerful  brake  upon  in- 
creases in  gold  output.  Gold  sells  at  the  same  price  per 
ounce,  regardless  of  the  cost  of  powder,  timber,  mill  supplies 
and  labor;  and  as  these  costs  rise  during  periods  of  high 
prices,  mine  after  mine  is  compelled  to  shut  down.  This 
effect  has  been  clearly  demonstrated  during  the  years  19 15 
to  19 19  inclusive.  Only  revolutionary  changes  in  gold 
metallurgy  could  change  this  condition,  so  that  we  may  as- 
sume that  whatever  may  be  the  effects  of  gold  output  on 
prices,  they  are  rapidly  self-compensatory.  As  prices  rise 
higher  and  higher,  more  and  more  gold  mines  will  have 
to  shut  down;  as  labor  and  commodity  prices  fall,  more 
and  more  gold  mines  will  be  opened  or  re-opened. 

The  future  of  gold  supply.  Looking  back  over  the  his- 
tory of  gold  production,  we  can  see  that  it  has  been  even 
more  irregular  than  that  of  the  purely  commercial  metals, 
though  the  irregularities  have  been  disposed  in  longer  swings 


THE  SUPPLY  OF  THE  PRECIOUS  METALS       151 

or  cycles.  At  the  beginning  of  each  cycle  we  have  had  the 
discovery  of  some  new  large  gold-producing  area,  and  for 
a  number  of  years  following  there  has  been  always  a  heavy 
increase  in  annual  output,  while  the  new  placers  or  surface 
deposits  were  being  cheaply  worked.  At  a  later  stage, 
when  the  cheaply  worked  portion  of  the  new  supply  has  been 
secured  —  and  this  is  ordinarily  a  matter  of  only  a  very  few 
years  —  there  is  a  tendency  to  falling  off  in  output.  A  little 
later  still,  this  is  again  counterbalanced  by  new  deeper  min- 
ing or  the  larger-scale  working  of  lower  grade  deposits. 

During  the  past  century  and  a  half  there  have  been  a 
number  of  great  gold  discoveries,  each  in  turn  following 
out  the  line  of  development  and  decline  above  noted.  The 
net  result,  however,  has  been  a  fairly  great  Increase  in  an- 
nual output,  for  so  far  none  of  our  larger  fields  has  been 
completely  exhausted  before  another  new  discovery  was 
made.  But  there  have  been  great  gaps,  of  several  decades 
each,  between  really  great  discoveries.  One  of  these  gaps 
seems  to  be  in  prospect  now,  for  all  of  our  present  sources 
of  supply  appear  to  have  reached  and  passed  their  maximum 
of  output,  and  for  many  years  past  there  has  been  no  new 
large  discovery  to  take  their  place. 

South  Africa,  for  example,  which  has  long  been  the 
mainstay  of  the  gold  supply  as  a  single  producer,  seems  to 
have  definitely  passed  Its  maximum  of  annual  output,  and  to 
be  preparing  for  a  slow  decline  in  productivity.  Estimates 
indicate  that  the  Rand  output  of  1930  may  fall  to  half  that 
of  1 9 15;  and  that  by  1945  the  annual  output  will  be  only 
a  quarter  of  that  of  the  earlier  date.  Actually  the  rate  of 
decline  may  not  be  so  rapid,  owing  to  the  development  of 
new  mines.  In  ground  now  deemed  doubtful.  But  the  pe- 
riod of  actual  growth  In  output  Is  certainly  ended.  The 
same  thing  may  be  said  of  most  of  the  other  goldfields  now 
worked  in  other  parts  of  the  world. 

When  It  becomes  obvious  that  the  gold  output  is  act- 
ually declining,  we  are  likely  to  see  efforts  made  in  the  way 


152  COAL,  IRON  AND  WAR 

of  careful  search  for  new  fields  and  in  the  working  of  lower 
grade  ores.  For  some  time  past  this  last  solution  of  the 
difficulty  has  been  impossible,  because  labor  and  commodity 
prices  were  too  high  to  justify  working  a  very  low  grade 
ore,  even  under  very  favorable  conditions  as  to  size  and 
location  of  the  ore  body.  But  as  commodity  prices  fall  and 
labor  becomes  more  abundant  low  grade  mines  will  again 
show  a  profit. 

The  case  of  silver.  Silver  might  perhaps  be  put  in  the 
same  class  with  lead,  so  far  as  relation  between  possible 
supply  and  industrial  demand  are  concerned,  for  there  has 
never  been  any  reason  to  doubt  the  abundance  of  known 
silver  deposits.  But  silver  has  a  place  in  coinage,  as  well  as 
commercial  uses,  and  as  the  warring  nations  come  to  readjust 
their  shattered  finances  there  may  be  a  relatively  large  de- 
mand for  silver  in  the  decade  to  come.  There  is  such  a 
demand  at  present,  it  is  true,  but  that  is  a  matter  of  Chinese 
and  Indian  requirements,  and  is  due  chiefly  to  exchange  con- 
ditions. When  that  particular  demand  has  subsided  we 
may  look  forward  to  increased  demand  from  Europe,  as  the 
first  step  back  toward  a  metallic  basis  for  currencies. 

Unless  such  a  currency  demand  should  materialize,  how- 
ever, we  will  see  silver  selling  at  far  lower  prices,  for  the 
known  ore  supply  seems  to  be  excessive  as  compared  with 
the  demand  for  silver  as  a  purely  industrial  metal. 


CHAPTER  XIII 
THE  SUPPLY  OF  COMMERCIAL  METALS 

In  the  chapters  immediately  preceding  there  has  been 
an  attempt  to  summarize  the  leading  facts  relative  to  the 
supply  and  distribution  of  the  chief  mineral  raw  materials 
—  the  fuels  and  iron  ore.  With  these  alone  as  a  basis  we 
could  go  far  toward  establishing  and  carrying  on  a  great 
industrial  development,  but  as  progress  continues  there 
arises  demand  for  certain  special  products  which  require 
other  raw  materials.  These  other  minor  materials  are  not 
seriously  important,  as  compared  to  coal  or  iron,  and  in 
case  of  their  disappearance  the  world  could  undoubtedly 
make  shift  to  replace  them  by  substitutes,  or  even  to  get 
along  without  them  entirely.  But  they  do  have  a  place  in 
industry,  and  the  extent  and  localization  of  their  supply 
are  matters  of  interest  in  connection  with  the  future  of  in- 
dustrial development  and  of  world  competition. 

Coal,  petroleum  and  iron  ore  and  the  question  of  gold 
and  silver  supplies  have  been  previously  discussed.  After 
making  these  important  exceptions,  the  remaining  mineral 
products  of  broad  industrial  interest  may  be  roughly  classi- 
fied as  falling  in  one  of  three  groups ;  metals,  chemical  raw 
materials  and  structural  materials.  These  will  be  taken  up 
in  the  order  named. 

The  difficulty  in  discussing  the  present  and  future  metal 
supply  available  for  the  world's  industrial  development 
arises  chiefly  from  the  fact  that,  with  the  fortunate  excep- 
tion of  iron,  most  metallic  ores  occur  in  deposits  of  such 
character  that  their  extent  can  not  be  determined  very  de- 
finitely in  advance  of  pretty  thorough  exploitation.     There 

153 


154  COAL,  IRON  AND  WAR 

is  the  counter-balancing  advantage,  however,  that  the  supply 
of  the  minor  commercial  metals  comes  largely  from  widely 
scattered  deposits,  so  that  even  a  serious  error  with  regard 
to  the  probable  supply  at  one  point  will  have  little  effect  on 
the  final  conclusions. 

It  need  hardly  be  said  that  consideration  will  have  to  be 
limited  here  to  the  leading  commercial  metals,  concerning 
which  most  information  is  fortunately  available.  The  so- 
called  rare  metals  are  not  only  comparatively  unimportant 
from  either  the  commercial  or  the  industrial  standpoint,  but 
In  many  instances  their  rarity  is  more  apparent  than  real, 
and  would  disappear  very  promptly  if  any  serious  and  con- 
tinued demand  arose  for  large  tonnages. 

With  these  limitations,  the  commercial  metals  which  re- 
main to  be  considered  here  are :  copper,  aluminum,  tin, 
nickel,  lead,  zinc  and  mercury.  These  will  be  briefly  dis- 
cussed in  turn,  but  before  doing  this  it  may  be  well  to  get 
some  Idea  as  to  the  relative  commercial  and  industrial  im- 
portance of  these  different  metals.  Some  of  the  facts  de- 
veloped may  be  rather  surprising,  and  some  of  their  impli- 
cations may  be  still  more  Important. 

Relative  tonnage  importance.  It  will  be  convenient  to 
take,  as  a  starting  point  for  our  study,  the  actual  tonnages 
of  the  various  metals  produced  all  over  the  world  in  the 
year  19 13.  It  may  be  noted  here  that,  throughout  this 
volume,  most  comparative  statistics  have  been  presented  for 
that  particular  year,  even  though  later  data  are  available, 
because  it  was  the  last  year  of  unrestricted  trade  and  normal 
development  throughout  the  world.  It  was,  moreover,  a 
fairly  prosperous  business  year,  but  not  by  any  means  a 
"boom"  period.  From  19 14  on  manufactures  and  in- 
dustry were  hampered  in  most  countries,  or  diverted  into 
exceptional  channels,  so  that  no  later  year  gives  a  fair  basis 
for  comparison.  With  this  explanation  we  will  return  to 
consideration  of  the  special  question  —  the  relative  quan- 
titative importance  of  the  commercial  metals. 


THE  SUPPLY  OF  COMMERCIAL  METALS       155 
World's  Metal  Output,  1913;  Tonnage  and  Value 

Output,  Total  value,  Average  <value, 

Metal  metric  tons  dollars  dollars  per  lb. 

Iron    78,000,000  $1,170,000,000  $0.0034 

Lead    1,155,000  114,500,000  .O41/2 

Copper   997,600  330,000,000  .15 

Zinc   994,000  120,300,000  .051/2 

Tin    118,000  103,800,000  .44 

Aluminum    80,000  35,200,000  .20 

Nickel   33,000  39,000,000  .40 

Silver    7,200  180,000,000  8.50 

Quicksilver   4,245  4,675,000  0.50 

Gold   682  455,000,000  300.00 

The  disproportion  between  iron  and  all  the  other  metals, 
so  far  as  quantities  are  concerned,  is  enormous.  For  a  good 
many  years,  in  fact,  pig  iron  has  accounted  for  over  95  per 
cent,  of  the  total  metal  output  of  the  world,  by  tonnage. 
Even  in  value,  it  amounts  to  over  half  of  the  total. 

Relative  rate  of  growth.  There  is  another  feature 
which  may  be  deduced  from  the  statistics  which  are  avail- 
able, and  this  is  the  relative  rates  at  which  the  world's 
output  of  the  different  metals  has  increased  during  recent 
years.  It  is  to  a  large  extent  an  index  of  the  rate  at  which 
demand  has  increased;  but  this  is  not  true  in  every  case,  be- 
cause we  do  have  a  few  metals  whose  output  can  no  longer 
increase  rapidly.  As  a  basis  for  this  comparison  we  may 
take  the  respective  outputs  of  the  different  metals  in  1903 
and  19 13,  and  calculate  the  rate  of  increase  during  the 
Intervening  decade.     This  is  done  In  the  following  table. 

Output,  IQ03,  Output,  lgi3,  Rate  of 

Metal  metric  tons  metric  tons    increase,  per  cent. 

Iron 46,400,000  78,000,000  68 

Lead  902,600  1,155,000  28 

Copper  591,300  997,600  68 

Zinc  571,600  994,000  73 

Tin  100,500  118,000  17 


156  COAL,  IRON  AND  WAR 

Output,  igo3,  Output,  igis,  Rate  of 

Metal  metric  tons  metric  tons    increase,  per  cent. 

Aluminum    8,200  80,000  875 

Nickel  9,900  33,000  233 

Silver   5,250  7,200  37 

Quicksilver   3,600  4,245  18 

Gold   490  682  39 

On  looking  over  these  results  we  will  see  immediately 
that  there  were  vast  differences  in  the  rate  of  development 
of  the  metal  industries.  Of  the  leading  commercial  metals 
three  —  iron,  copper  and  zinc  —  showed  almost  the  same 
rate  of  increased  output  in  the  course  of  the  decade,  averag- 
ing close  to  70  per  cent.  Two  —  aluminum  and  nickel  — 
showed  phenomenal  rates  of  growth.  Two  others  —  tin 
and  quicksilver  —  showed  very  small  rates  of  increase,  so 
small  as  to  arouse  suspicions  as  to  their  future,  which  we 
shall  see  are  justified.  The  others  —  gold,  silver  and  lead, 
showed  rates  of  increase  intermediate  between  the  growing 
industrial  metals  and  the  vanishing  metals. 

Relative  natural  abundance.  The  matters  so  far  dis- 
cussed deal  with  questions  of  present  fact,  which  can  be 
readily  checked  against  error.  It  is  possible,  however,  to 
carry  the  investigation  further,  along  a  very  interesting  line, 
but  one  which  it  is  necessary  to  follow  with  extreme  care. 
This  leads  us  to  consideration  of  the  relative  natural  abun- 
dance of  the  various  metals  in  the  earth,  and  to  the  rela- 
tions which  exist  between  this  abundance  and  their  present 
output  and  price.  It  can  be  seen  that,  if  we  had  complete 
data  on  the  main  point,  we  could  draw  some  fairly  precise 
conclusions  as  to  the  future  of  the  different  metals.  But 
the  data  are  not  complete,  and  it  is  hardly  necessary  to  warn 
the  reader  that  the  results  we  obtain  by  their  use  are  merely 
tentative. 

The  following  table  contains  the  data  we  have  available 
as  to  the  relative  natural  abundance  or  scarcity  of  a  number 
of  our  most  important  commercial  metals.     The  percen- 


THE  SUPPLY  OF  COMMERCIAL  METALS       157 

tages  quoted  in  the  first  column  of  figures  are,  so  far  as  iron, 
aluminum  and  nickel  are  concerned,  taken  from  the  most 
recent  work  of  Dr.  F.  W.  Clarke.^  Those  relative  to  the 
other  metals  are  from  a  recent  estimate  by  Prof.  W.  Lind- 
gron,^  and  are  to  be  regarded  as  the  most  authoritative 
statement  on  the  subject.  The  last  column  is  simply  figured 
from  the  percentages,  so  as  to  bring  out  comparative  results 
more  sharply. 

Relative  Natural  Abundance  in  Earth's  Crust 

Percentage  in    Relative  abundance 
Metal  earth's  crust  gold  =.  i 

Aluminum   7.84  15,680,000 

Iron 4.44  8,800,000 

Nickel 0.023  46,000 

Copper  ,.  0.0075  15,000 

Zinc    0.0040  8,000 

Lead 0.0020  4,000 

Silver   0.00001  20 

Gold    0.0000005  1 

These  figures  may  now  be  used,  subject  to  the  caution 
already  noted,  as  the  basis  for  a  further  comparison.  This 
has  been  done  in  the  following  table,  in  which  the  data  for 
annual  output  and  cheapness  are  derived  from  the  figures 
previously  given  for  the  results  of  19 13. 

Natural 
Metal  abundance  Annual  output        Cheapness 

Gold    1  1  1 

Silver   20  12  34 

Lead    4,000  1,700  6,700 

Zinc   8,000  1,460  5,400 

Copper  15,000  1,470  2,000 

Nickel  46,000  49  750 

Iron    8,800,000  115,000  40,000 

Aluminum   15,680,000  117  1,500 

1  Data  of  Geochemistry,  Bulletin  491,  U.  S.  Geological  Survey,  p.  32-34' 

2  Mineral  Deposits,  p.  14. 


158  COAL,  IRON  AND  WAR 

There  are  two  conclusions,  and  two  only,  that  it  seems 
safe  to  draw  from  the  remarkable  disparities  shown  by  the 
preceding  table.  The  first  is  that  two  metals  —  nickel  and 
aluminum  —  may  fairly  be  expected  to  play  a  more  promi- 
nent part  in  industry  in  the  future  than  at  present,  for  unless 
the  data  as  to  natural  abundance  are  very  faulty  they  are 
entirely  too  common  in  nature  to  be  made  at  the  rate  of  only 
33  and  80  thousand  tons  a  year  respectively.  The  second 
conclusion  which  seems  justified  is  one  which  De  Launay 
first  noted  —  that  gold  seems  to  be  ever-produced  by  com- 
parison with  its  real  natural  scarcity.  But  any  further  use 
of  this  comparative  table,  interesting  though  it  may  be,  leads 
us  into  a  field  too  speculative  to  be  of  much  service  in  our 
present  study,  and  the  matter  may  accordingly  be  dropped 
at  this  point. 

From  these  strayings  in  the  direction  of  a  somewhat  nebu- 
lous metallurgy  of  the  distant  future,  we  may  profitably 
turn  to  consideration  of  a  coldly  practical  problem  —  the 
suppHes  of  commercial  metals  —  and  commence  with  the 
metal  which  is,  next  to  iron,  of  broadest  general  importance 
to  our  present  civilization. 

Copper.  Copper,  now  second  of  our  commercial  metals 
in  importance,  was  in  reality  the  first  metal  known  to  human 
industry,  and  for  very  many  centuries  it  was  a  far  more  im- 
portant product  than  iron.  The  ancient  civilizations  were 
built  up,  not  on  iron  and  steel,  but  on  copper,  tin  and  gold; 
and  each  of  these  metals  has  over  six  thousand  years  of 
recorded  history  behind  it. 

The  copper  production  of  the  world  has  increased  from 
a  total  of  perhaps  15  thousand  tons  in  1820  to  about  55 
thousand  in  1850;  and  so  on  up  to  its  present  output  of  close 
to  one  million  tons  annually.  Its  growth  has  been  in  close 
sympathy  with  progress  in  armaments  and  in  electrical  de- 
velopment, and  these  two  factors  account  for  most  of  the 
fluctuation  in  copper  demand  throughout  the  past  century. 
Of  the  two,  electrical  development  at  least  seems  likely  to 


THE  SUPPLY  OF  COMMERCIAL  METALS      159 

grow  at  an  Increased,  rather  than  a  decreased,  rate  during 
some  decades  to  come,  while  there  Is  as  yet  no  serious  fall- 
ing off  in  the  probable  demand  for  armaments.  The  future 
demand  for  copper,  therefor,  seems  likely  to  increase  at  a 
rate  greater,  perhaps,  than  it  has  shown  in  the  past. 

The  geographic  distribution  of  the  copper  industry  has 
changed  very  strikingly  during  the  past  few  decades,  for 
along  with  Increased  total  output  has  come  a  very  great 
shifting  in  the  relative  rank  of  the  different  producing  coun- 
tries. In  1880,  for  example,  the  world  copper  output  was 
about  150  thousand  tons  and  of  this  over  two-thirds  came 
from  Chile,  Spain  and  the  United  States,  in  the  order  named. 
At  that  date  the  United  States  was  making  just  about  one 
sixth  of  the  total.  But  from  then  onward  steady  growth 
In  the  American  output  gave  over  half  the  world  output 
^y  1^95)  while  Japan  had  reached  a  figure  almost  equal 
to  that  of  Chile,  and  Mexico  was  beginning  to  show  de- 
velopment. Another  decade,  and  the  two  old  leaders  had 
fallen  back  to  fourth  and  fifth  place  respectively,  for  while 
the  United  States  maintained  its  position  both  Japan  and 
Mexico  passed  Chile  and  Spain.  Still  later  Australia  pro- 
duced larger  amounts,  and  entered  fourth  place. 

In  the  years  immediately  preceding  the  World  War  we 
may  say  that  the  total  world  output  of  copper  was  somewhat 
over  800  thousand  tons  annually,  and  that  of  this  total  the 
United  States  produced  over  half.  The  remaining  produc- 
tion was  widely  scattered,  with  Japan,  Mexico  and  Australia 
making  some  50  thousand  tons  each,  followed  by  Spain, 
Chile,  Peru,  Russia,  Canada  and  Germany,  all  of  which  had 
annual  outputs  of  from  20  to  40  thousand  tons. 

As  to  future  changes  In  geographic  distribution  of  the  in- 
dustry, there  are  some  which  seem  probable  enough.  The 
United  States  will  maintain  Its  leadership  for  a  very  long 
time  to  come,  but  It  is  likely  that  the  percentage  of  total  out- 
put produced  In  the  States  will  fall  off,  and  that  perhaps 
very  soon  and  quite  markedly.     The  new  increases  In  pro- 


i6o  COAL,  IRON  AND  WAR 

duction  are  most  likely  to  come  from  mines  in  Mexico,  Peru, 
and  Chile,  and  the  Belgian  and  French  Congo  regions. 

As  regards  future  copper  costs,  the  industry  is  in  an  in- 
teresting and  curious  position.  The  prices  received  during 
the  World  War  were  very  high,  and  it  is  probable  that  the 
copper  prices  of  future  years  will  fall  off  steadily,  along  with 
those  of  other  commodities,  as  currency  inflation  is  progres- 
sively reduced.  But  there  is  no  reason  why  copper  prices 
should  fall  off  faster  than  the  average  of  commodity  prices, 
and  some  reason  to  believe  that  they  will  not  fall  off  as 
fast.  During  the  past  decade  we  saw  a  very  great  revolu- 
tion in  mining  and  treatment  methods,  resulting  in  the  cop- 
per market  being  overloaded,  at  times,  by  the  enormous  out- 
put of  the  new  low-grade  western  mines.  It  is  unlikely  that 
a  similar  situation  will  occur  again,  for  some  time  to  come 
at  least.  Meantime  these  mines  seem  to  have  reached  their 
maximum  of  output,  and  to  have  passed  their  minimum  of 
cost.  There  are  no  new  developments  immediately  in  sight 
which  will  operate  to  press  down  prices  with  the  same  force 
in  future.  Indeed,  it  is  probable  enough  that  the  first  great 
renewal  of  industrial  activity  after  the  war,  a  renewal  which 
does  not  seem  imminent  but  which  will  certainly  come  sooner 
or  later,  will  find  a  relatively  short  supply  of  copper.  As 
with  coal  and  iron,  we  may  easily  have  passed  extremely 
low  prices  for  all  time  to  come. 

Actual  conditions  as  to  known  copper  ore  reserves  and 
economic  rate  of  output  appear  to  indicate  that  whenever 
the  economic  structure  of  the  world  gets  into  shape  again, 
after  a  severe  and  perhaps  long  readjustment,  we  may  face 
for  a  time  something  like  an  actual  scarcity  of  copper.  It 
is  true  that,  at  this  date,  the  copper  mining  and  copper  re- 
fining capacity  of  the  world  is  far  larger  than  it  has  ever 
been  before.  It  is  also  true  that,  thanks  to  the  develop- 
ment of  the  large  low-grade  ore  supplies  of  Utah,  New 
Mexico  and  other  western  states,  we  can  now  safely  figure 
on  a  known  and  determined  ore  reserve  far  larger  than 


THE  SUPPLY  OF  COMMERCIAL  METALS       i6i 

ever  before.  But  when  this  is  said  we  must  admit  on  the 
other  side  that  the  Lake  Superior,  Rio  Tinto  and  other 
older  districts  are  nearing  their  end  as  important  producers, 
that  the  known  low-grade  deposits  are  now  developed  to 
somewhere  near  their  maximum  economic  rate  of  output, 
and  that  some  even  of  these  newer  producers  are  well  ad- 
vanced toward  exhaustion.  The  result  is  that,  despite  the 
large  known  ore  reserves,  there  is  not  now  in  sight  any- 
where such  a  new  tonnage  as  has  been  overhanging  the 
market  while  these  western  deposits  were  in  course  of  de- 
velopment. 

Whenever  the  world  experiences  another  period  of  ex- 
tensive industrial  activity,  therefore,  it  is  probable  that  cop- 
per will  be  somewhat  scarce  and  relatively  somewhat  dearer 
than  it  was  during  the  years  just  before  the  war.  The 
trend  may  on  that  account  be  toward  somewhat  higher  cop- 
per prices,  regard  being  paid  of  course  to  the  course  of 
average  commodity  prices.  The  end  will  come,  either 
through  new  developments  in  Africa  or  elsewhere,  or  by  the 
competition  of  aluminum,  a  factor  which  is  daily  becoming 
more  important,  since  this  new  metal  can  replace  copper 
very  effectively  for  some  of  its  most  important  uses. 

Aluminum.  The  metal  now  to  be  considered  is  rela- 
tively new,  its  use  dating  back  less  than  a  century,  as  com- 
pared with  the  six  thousand  years  during  which  mankind 
has  used  copper.  Nevertheless,  its  growth  during  this 
short  period  has  been  one  of  the  most  astounding  in  all 
industrial  development.  First  made  commercially  by  St. 
Claire  Deville  in  1855,  it  remained  little  more  than  a  chemi- 
cal curiosity  for  thirty  years,  during  which  the  output  was 
relatively  small  at  a  price  decreasing  from  ninety  down  to 
five  dollars  a  pound. 

During  the  decade  1 880-1 890  the  industry  changed 
sharply,  under  the  stimulus  of  several  great  inventions  re- 
lating to  aluminum  metallurgy,  for  the  Gratzel,   Cowles, 


1 62  COAL,  IRON  AND  WAR 

Heroult  and  Hall  patents  all  date  back  to  that  decade. 
From  about  that  time  on  we  can  look  upon  aluminum  as  a 
real  commercial  metal.  From  an  output  of  a  few  hun- 
dred pounds,  at  a  price  of  five  to  ten  dollars  a  pound  in 
1880,  we  have  come  to  a  current  world  output  of  some  fifty 
to  sixty  thousand  tons  a  year,  and  the  price  now  falls,  dur- 
ing years  of  depression,  to  well  under  twenty  cents  a  pound. 
The  cost  of  manufacture  in  Europe,  during  the  years  im- 
mediately preceding  the  World  War,  seems  to  have  been 
not  far  from  ten  cents  a  pound,  and  In  future  this  figure 
may  be  reduced  rather  than  increased,  since  there  is  no 
lack  of  raw  materials  for  this  industry  at  least. 

Geographically,  the  industry  is  localized  very  sharply. 
Of  the  current  total  of  some  50  to  60  thousand  tons  an- 
nually, about  half  comes  from  the  United  States  and 
Canada;  a  quarter  from  France;  one  sixth  from  Switzer- 
land and  the  Central  Powers,  and  one  eighth  from  England. 
Italy  and  Norway  enter  the  market  with  smaller  tonnages. 
The  localization,  within  the  countries,  is  still  more  pro- 
nounced, the  output  being  all  made  in  a  few  very  large 
units.  The  points  of  manufacture,  within  the  country,  are 
determined  very  largely  by  the  existence  of  cheap  electricity, 
for  the  main  processes  of  reducing  aluminum  from  its  ores 
are  now  electrolytic. 

The  chief  ore  of  aluminum  is  the  mineral  known  as  baux- 
ite, a  hydrous  aluminum  oxide,  which  occurs  in  large  de- 
posits In  many  parts  of  the  world.  The  principal  deposits 
now  worked  are  in  Arkansas,  Georgia,  France  and  Italy; 
but  very  heavy  tonnages  are  known  to  exist  also  In  India, 
French  and  British  Guiana,  and  Cuba.  In  this  dependence 
upon  one  particular  mineral  as  Its  main  ore  aluminum  differs 
sharply  from  iron,  and  this  accounts  In  part  for  the  differ- 
ence in  output  and  cost  of  the  two  metals.  As  to  natural 
abundance,  we  have  seen  on  a  previous  page  that  the  earth's 
crust  contains  almost  twice  as  much  aluminum  as  iron;  but 
this  high  aluminum  content  exists  almost  entirely  In  the 


THE  SUPPLY  OF  COMMERCIAL  METALS       163 

form  of  aluminum  silicate  minerals,  while  aluminum  oxides 
are  rare  as  compared  with  iron  oxides. 

It  may  be  borne  in  mind,  however,  that  this  rarity  is  only 
relative,  and  that  bauxite  of  one  grade  or  another  is  far 
from  being  a  scarce  mineral.  But  in  its  better  grades,  free 
from  iron  and  silica,  It  is  relatively  scarce,  and  one  limita- 
tion on  the  ultimate  cheapness  of  metallic  aluminum  is  thus 
brought  into  view. 

With  this  fact  In  mind,  much  attention  has  been  directed 
toward  the  development  of  processes  by  which  metallic 
aluminum  could  be  produced  from  the  very  common  alumi- 
num minerals,  such  as  clays  and  feldspars.  Clay  has  of 
course  been  a  particular  favorite  in  this  line  of  study,  and 
numberless  processes  have  been  invented  and  patented 
covering  some  method  of  producing  aluminum  from  clay. 
The  chemical  difficulties  are  of  course  not  insurmountable, 
but  with  regard  to  the  commercial  side  of  the  matter  the 
case  is  very  different.  So  far  as  we  can  see  now,  it  will 
always  be  cheaper  to  use  bauxite  as  a  basis  for  aluminum 
metallurgy  than  to  use  clay  or  any  other  aluminum  silicate. 
It  would  take  great  changes  In  the  cost  of  electricity  or  of 
chemical  reagents  to  destroy  this  initial  advantage  of  baux- 
ite, even  If  we  assume  that  bauxite  deposits  are  very  scarce. 
And  this  latter  conclusion  does  not  seem  to  be  justified  by 
our  present  knowledge. 

The  future  growth  of  the  aluminum  industry  seems  likely 
to  depend,  in  great  part,  on  the  manner  in  which  it  re- 
places other  metals.  Aluminum  does  have  some  special 
properties  which  give  it  special  uses,  but  to  a  great  extent 
it  is  coming  into  service  as  a  replacement  of  copper  (in 
wire)  and  of  tin  and  enameled  ware  elsewhere.  As  against 
copper,  the  competition  is  a  matter  of  weight  and  electrical 
resistance,  which  are  fixed  quantities,  and  of  relative  price, 
which  Is  not  fixed  by  nature.  The  aluminum  output  of  the 
future  Is  likely  to  be  produced  at  lowered  costs,  while  that 
of  copper  seems  more  likely  to  be  made  at  slightly  increased 


i64  COAL,  IRON  AND  WAR 

costs.  As  against  tin,  the  other  metal  which  meets  alumi- 
num in  competitive  uses,  the  case  is  very  definitely  in  favor 
of  aluminum.  We  will  see  later  that  tin  seems  on  the 
way  to  becoming  a  very  scarce  metal  indeed.  The  pro- 
spects are  in  favor,  therefore,  of  heavily  increased  aluminum 
output  in  future. 

Lead.  Unlike  the  metal  last  discussed,  lead  has  a  very 
long  industrial  history,  for  even  in  Roman  times  it  was 
utilized  for  many  of  its  present  purposes. 

At  the  end  of  the  Napoleonic  Wars  the  lead  output  of 
the  world,  then  derived  chiefly  from  Great  Britain  and 
Spain  as  had  been  indeed  the  case  for  very  many  centuries 
previously,  amounted  to  some  50  thousand  tons.  This  in- 
creased, during  the  first  great  industrial  revival  from  that 
war  period,  to  a  total  of  about  100  thousand  tons  around 
1835.  By  1850  this  had  been  increased  to  about  140  thou- 
sand tons  a  year.  At  that  date  Great  Britain  still  ac- 
counted for  about  half  of  the  total,  and  Spain  for  one  quar- 
ter. Of  the  other  countries  contributing  lead,  the  United 
States  and  Germany  each  made  about  20  thousand  tons; 
while  Austria  and  several  other  European  countries  made 
far  smaller  tonnages.  The  American  output  of  that  date 
was  chiefly  from  Illinois,  Wisconsin,  Iowa  and  Missouri. 

In  the  decades  after  the  American  Civil  War  the  west- 
ern states  began  to  turn  out  lead  heavily,  in  connection  with 
silver  mining.  The  world's  output  of  lead,  which  had  in- 
creased in  total  roughly  in  sympathy  with  development  of 
other  industries,  amounted  to  some  300  thousand  tons  in 
1885,  of  which  the  United  States  contributed  a  little  over  a 
third,  and  Germany  a  little  less.  Spain  was  in  third  place, 
and  Great  Britain  fourth,  the  latter  making  at  that  date 
only  some  12  per  cent,  of  the  world  total. 

The  next  decades  were  marked  by  the  further  growth  of 
American  output,  the  entry  of  Australia  as  a  lead  producer, 
the  rehabilitation  of  Spanish  output,  and  the  growing  im- 
portance of  Mexico.     In  the  years  before  the  World  War 


THE  SUPPLY  OF  COMMERCIAL  METALS      165 

the  total  lead  output  of  the  world  ranged  from  900  to 
1 200  thousand  metric  tons.  Of  this  the  United  States  nor- 
mally furnished  about  30  per  cent.,  while  Spain,  Germany 
and  Mexico  produced  from  10  to  15  per  cent,  each,  and 
Austraha  only  slightly  less.  The  five  countries  named,  for 
many  years,  produced  together  around  85  per  cent,  of  the 
total  supply  of  the  world. 

The  commercial  uses  of  lead  have  not  broadened  dur- 
ing recent  decades  as  rapidly  as  have  those  of  some  other 
metals.  It  enters  trade  for  use  as  pigment,  shot,  pipe,  as 
a  component  of  a  number  of  alloys,  and  as  acid-proof  lining 
for  various  chemical  and  metallurgical  processes,  and  in 
storage  batteries.  In  some  of  these  uses  it  will  be  seen 
that  the  lead  is  required  by  growing  industries  for  which 
a  growing  demand  may  be  expected,  while  in  others  it  is 
used  in  ways  which  show  little  tendency  to  increase  faster 
than  the  normal  growth  of  population. 

Lead  has  a  unique  mining  and  metallurgical  position, 
which  serves  to  throw  some  light  on  Its  always  difficult 
commercial  status.  In  most  mining  regions  this  unfor- 
tunate metal  is  largely  a  by-product,  turned  out  casually 
in  the  mining  or  refining  of  other  metals,  and  particularly 
in  the  production  of  silver  and  zinc.  The  cost  of  lead 
production  Is  therefore  chiefly  a  matter  of  book-keeping, 
and  the  amount  of  lead  produced  depends  in  large  part 
on  the  current  demand  for  silver  or  zinc.  Under  these 
circumstances  there  are  always  great  possibilities  for  trouble 
In  the  lead  market.  Mined  for  itself  alone,  there  might 
at  times  be  some  deficiency  In  the  current  supply,  and  some 
natural  tendency  for  a  temporary  or  even  permanent  rise 
in  price.  But  as  matters  stand  now,  the  case  seems  to  be 
all  the  other  way.  Lead  prices  are  commonly  maintained 
with  some  apparent  difficulty,  and  whenever  any  largely 
increased  demand  for  either  zinc  or  silver  results  in  greatly 
Increased  outputs  of  these  metals,  the  incidentally  increased 
lead  supply  Is  frequently  in  excess  of  the  normal  demand 


1 66  COAL,  IRON  AND  WAR 

for  that  metal,  and  tends  to  cause  instability  of  lead 
prices.  In  any  case  we  need  no  fear  as  to  exhaustion,  in 
the  near  future,  of  our  supplies  of  lead. 

Zinc.  Unlike  lead  and  copper,  zinc  has  a  very  short 
industrial  history  as  commercial  metal,  for  there  was  no 
broad  use  for  metallic  zinc  until  the  last  century.  Zinc 
ores,  however,  had  been  used  even  in  times  of  remote 
antiquity  for  addition  to  copper  in  order  to  make  the  alloy 
brass.  But  during  all  the  early  periods  the  alloy  seems 
to  have  been  always  made  in  that  way,  by  addition  of  an 
ore,  and  not  by  use  of  the  metal  itself.  When  trade  to 
the  East  Indies  became  common,  however,  during  the  seven- 
teenth century,  zinc  metal  appears  to  have  been  one  of  the 
occasional  products  reaching  Europe;  and  at  a  little  later 
date  the  production  of  metallic  zinc  was  taken  up  at  various 
points  in  Europe. 

Around  1850  the  world's  zinc  output  amounted  to  some 
50  thousand  tons,  of  which  60  per  cent,  came  from  Prussian 
Silesia  and  30  per  cent,  from  the  Moresnet  region  of 
Belgium.  The  remainder  of  the  supply  was  made  in  Russia, 
Wales,  Austria  and  the  United  States.  From  this  level 
the  output  increased  steadily  to  300  thousand  tons  in  1885 
and  over  one  million  tons  in  19 13.  With  this  vast  increase 
in  output  there  was  less  change  in  producing  localities  than 
was  the  case  with  most  other  metals  during  the  same 
period.  Just  before  the  World  War,  for  example,  Bel- 
gium still  produced  20  per  cent,  of  the  total,  and  Germany 
30  per  cent.  The  United  States,  however,  was  making 
slightly  more  than  Germany.  In  1850  two  countries  pro- 
duced together  90  per  cent,  of  the  world's  zinc  output; 
in  19 13  these  same  two  countries,  plus  a  third  one,  pro- 
duced almost  the  same  proportion  of  the  total.  This 
concentration  of  supply  goes  far  toward  explaining  some 
of  the  earlier  munitions  difficulties  of  the  Allies,  because 
it  is  seen  that,  within  a  week  after  the  declaration  of  war, 
almost  exactly  three-quarters  of  the  zinc  smelting  capacity 


THE  SUPPLY  OF  COMMERCIAL  METALS      167 

of  Europe  was  in  the  hands  of  the  Central  Powers,  and 
as  the  zinc  smelters  of  England  were  run  on  Australian 
ores  a  large  fraction  of  the  remaining  Allied  output  was 
in  danger  of  being  cut  off.  From  this  resulted,  when  the 
situation  was  finally  understood  by  the  War  Office,  the 
pressure  on  American  and  Colonial  production  in  order  to 
make  up  this  deficiency.  How  that  pressure  was  responded 
to  is  a  matter  of  our  own  recent  industrial  history,  though 
some  of  its  incidental  results  were  most  strikingly  shown 
on  the  Stock  Exchange. 

Zinc,  like  quicksilver,  is  a  metal  with  two  names,  one  of 
which  tends  to  be  used  in  trade  and  the  other  in  technical 
work.  For  several  centuries  metallic  zinc  has  been  dealt 
in  commercially  under  the  trade  name  of  "  spelter." 
There  is  no  particular  reason  for  continuing  this  usage, 
and  it  is  to  be  hoped  that  it  will  die  away  in  the  near  future. 

In  considering  the  future  of  the  metal,  both  as  regards 
output  and  prices,  it  is  necessary  to  recall  that  its  present 
chief  utilizations  are  along  the  lines  of  galvanized  wire 
and  sheets,  of  battery  zincs,  of  brasses,  of  pigment  and 
in  form  of  zinc  compounds  in  various  chemical  and  metal- 
lurgical processes.  *  The  many  points  of  contact  thus  es- 
tablished between  the  zinc  supply  and  the  prosperity  of  a 
number  of  important  industries  tends  to  give  demand  for 
zinc  an  increase  almost  directly  proportionate  to  those 
for  iron  and  copper.  In  the  future,  which  for  many  reasons 
we  may  assume  will  show  greater  developments  along 
chemical  than  along  mechanical  lines,  zinc  may  assume 
even  greater  importance  than  it  has  at  present. 

No  definite  estimates  are  known  to  have  been  published 
regarding  the  available  supply  of  zinc  ores,  but  so  far  as 
can  be  judged  from  commercial  conditions  over  a  long 
period  of  time,  the  demand  for  zinc  is  .expanding,  on  the 
whole,  somewhat  faster  than  new  ore  supplies  are  being 
brought  to  light.  This  condition  has  been  marked  recently 
by  the  intense  pressure  due  to  the  European  war,  when  a 


i68  COAL,  IRON  AND  WAR 

large  demand  for  immediate  supply  of  zinc  metal  fell  on 
a  world  which  was  temporarily  deficient  in  smelting  ca- 
pacity. In  the  course  of  filling  this  demand,  smelters  were 
overbuilt  and  mines  were  over-developed.  Just  at  present, 
therefore,  the  visible  supply  both  of  metal  and  of  ore  seems 
too  great  for  the  peace  demand  —  but  this  condition  may 
be  changed  in  the  course  of  the  next  great  period  of  indus- 
trial activity,  whenever  that  may  come. 

A  sharp  distinction  must  be  made,  and  kept  in  mind, 
between  the  geographic  distribution  of  the  world's  metal- 
lic zinc  output  and  the  distribution  of  its  supplies  of  zinc 
ores.  In  an  earlier  paragraph  it  was  noted  that  the  zinc 
output  was  very  concentrated,  three  countries  producing 
most  of  the  metal.  But  this  concentration  of  the  industry 
was  due  in  large  part  merely  to  trade  habit,  such  as  made 
Swansea  the  important  copper  metal  producer  of  the  world 
long  after  the  local  ore  deposits  had  much  remaining  im- 
portance. Zinc  ores  are  really  pretty  widely  distributed 
over  the  earth  and  few  countries  would  have  to  depend  on 
imported  ore  for  their  metal  supply  if  it  were  worth  while 
developing  local  smelting  industries. 

Tin.  As  a  commercial  metal,  tin  has  a  very  respectable 
record  from  early  antiquity,  for  as  early  as  4500  B.  c.  tin- 
copper  bronzes  were  widely  used  in  Egyptian  ornaments 
and  weapons.  Copper,  and  probably  gold,  preceded  tin 
in  human  use;  but  one  of  the  real  difficulties  in  early  history, 
which  no  antiquarian  has  bothered  to  explain,  was  how  such 
an  unusual  alloy  as  bronze  could  appear  at  such  an  early 
stage  of  civilization.  It  is  possible  that  it  was  at  first 
made,  not  from  a  mixture  of  metallic  copper  and  metallic 
tin,  but  from  one  of  the  ores  in  which  copper  and  tin  both 
appear.  However  that  may  be,  the  use  of  tin  seems  to  have 
preceded  that  of  iron  in  Europe  and  Asia  by  many  hundreds 
and  thousands  of  years. 

The  earliest  tin  supply  was  probably  drawn  from  the 
eastern  Mediterranean  regions,  but  Cornwall  soon  became 


THE  SUPPLY  OF  COMMERCIAL  METALS      169 

of  trade  importance.  Throughout  the  centuries,  until  the 
close  of  the  eighteenth,  Britain  remained  the  principal 
source  of  tin  supply  for  the  European  world.  The  Cornish 
output  is  known  to  have  grown  up  slowly  to  about  one 
thousand  tons  a  year  by  1650;  there  was  increased  demand 
as  the  eighteenth  century  came  in;  and  during  the  Seven 
Years  and  Napoleonic  Wars  the  output  of  Cornwall  rose 
to  several  thousand  tons  annually. 

After  a  temporary  relapse  in  the  early  decades  of  the 
nineteenth  century,  a  falling  off  noted  in  all  industries  from 
1 8 10  to  1825  or  so,  the  growth  of  the  tin  output  was  re- 
sumed, and  by  1850  it  had  reached  some  5000  tons.  The 
next  decade,  however,  witnessed  a  remarkable  gain  in  out- 
put, together  with  a  rapid  rise  in  price ;  and  this  stimulated 
development  of  tin  deposits  elsewhere  in  the  world.  The 
increased  demand  was  due  largely  to  the  use  of  tin,  both 
in  bronzes  and  as  a  lead-hardener,  in  the  re-armament 
which  took  place  during  that  decade  in  Europe.  The 
Crimean,  Italian,  American  and  Prussian  wars  aided  to 
keep  demand  active  and  prices  high  for  two  decades.  Then, 
after  the  long  business  depression  following  this  series  of 
wars,  a  new  demand  for  tin  arose.  This  was  a  demand 
independent  of  war  use,  for  the  canned  provision  trade  had 
commenced  its  remarkable  development  which  is  still  in  pro- 
gress. 

In  the  years  1850  to  1900,  the  price  of  tin  ranged  from 
15  cents  a  pound  in  depressed  periods  to  35  cents  a  pound 
during  boom  years.  During  the  past  two  decades,  however, 
a  new  and  higher  range  of  prices  has  been  established,  and 
this  does  not  seem  to  be  entirely  due  to  general  rise  in  the 
price  level  but  to  a  growing  scarcity  of  tin  itself.  The 
world's  output  of  tin  had  increased  from  a  total  of  38 
thousand  tons  in  1880  to  120  thousand  in  the  years  just 
before  the  World  War.  Its  rate  of  growth  was  therefor 
very  markedly  slower  than  that  of  iron,  copper  or  other 
commercial  metals,   and  the  disquieting  feature  was  that 


170  COAL,  IRON  AND  WAR 

even  years  of  high  prices  failed  to  Induce  any  large  increase 
in  the  supply  later. 

The  sources  of  commercial  tin  are  relatively  few.  Dur- 
ing the  past  forty  years  the  Federated  Malay  States  have 
always  contributed  from  40  to  60  per  cent,  of  the  total 
output,  while  Bolivia  and  the  Dutch  East  Indies  furnish 
each  about  20  per  cent.  Australia  and  Cornwall  are  the 
only  remaining  producers  whose  output  enters  world's 
markets  In  any  serious  way,  though  the  Chinese  supply, 
consumed  locally.  Is  probably  larger  than  either. 

Of  the  great  producing  areas,  Bolivia  is  the  only  one 
which  has  shown  a  steady  growth  In  output  during  recent 
years,  and  the  main  hope  for  any  large  increase  in  future 
supply  seems  to  lie  In  the  Andean  regions.  The  Dutch 
Indies  and  the  Malay  States  show  little  tendency  to- 
ward increased  output,  even  during  or  after  years  of  high 
prices,  and  It  Is  possible  that  both  have  passed  their  maxi- 
mum of  trade  importance.  In  both  cases,  however,  there 
are  great  possibilities  of  Improvement  In  technical  con- 
ditions, and  the  application  of  dredging  methods  in  the 
Malay  States  Is  a  step  In  this  direction. 

Among  the  minor  producers  of  tin  some  are  old  and 
slowly  dying  districts,  like  Cornwall  and  the  smaller 
European  regions;  others,  like  Australia,  produce  a  certain 
tonnage  but  with  little  promise  of  large  future  Increase; 
still  others,  like  Alaska,  are  relatively  new  producers  whose 
future  is  still  uncertain. 

But  among  them  all  there  are  none  which  give  any  re- 
markable promise;  none,  that  is  to  say,  which  give  reason 
to  hope  that  in  future  they  will  replace  the  Malay  States 
in  Importance.  Unless  some  new  sources  of  supply  appear 
the  tin  output  is  not  likely  to  Increase  like  that  of  other 
commercial  metals. 

As  a  matter  of  fact,  tin  seems  to  be  really  a  very  scarce 
metal,  far  scarcer  than  Its  current  commercial  prices  would 
indicate.     The  original  deposits  of  tin  ore  In  hard  rock  are 


THE  SUPPLY  OF  COMMERCIAL  METALS      171 

commonly  of  very  low  grade,  and  it  is  only  the  occurrence 
of  placer  or  stream  deposits  of  tin  ore  which  have  kept 
down  the  price  of  tin  within  its  past  range.  As  these  placer 
deposits  are  finally  exhausted,  unless  they  are  replaced  in 
the  industry  by  new  and  important  deposits  elsewhere,  or 
by  great  increases  in  Bolivian  or  other  lode  mines,  the  price 
of  metallic  tin  must  continue  to  increase.  Indeed,  if  the 
demands  of  the  supply  grow  as  fast  in  future  as  they  have 
in  the  past,  the  increase  in  tin  prices  may  be  very  marked 
indeed,  for  at  present  there  are  no  deposits  in  sight  which 
give  promise  of  affording  largely  increased  tin  supplies  at 
present  prices.  The  adaptation  of  aluminum  to  containers 
may  be  the  final  way  out  of  this  impasse. 

Quicksilver.  The  metal  quicksilver,  or  mercury,  has 
long  been  known  and  utilized  in  various  forms.  Its  two 
most  extensive  industrial  uses  —  for  recovering  gold  and 
silver  and  for  gilding  —  were  practised  by  the  Romans 
and  throughout  the  Middle  Ages.  With  the  discovery  of 
the  American  silver  mines  the  amalgamation  process  took 
new  life,  while  on  the  other  hand  the  use  of  mercury  gild- 
ing fell  off  after  electro-plating  methods  were  discovered, 
since  these  latter  were  safer  and  more  economical.  From 
the  commencement  of  Spanish  operation  in  the  sixteenth 
century,  of  the  Mexican  and  Peruvian  silver  mines  there 
was  a  steady  increase  in  the  metallurgic  demand  for  quick- 
silver. This  reached  a  maximum,  relatively  to  other  in- 
dustries, in  the  period  1 850-1 870  when  the  discovery  of 
the  California  and  Australian  gold  deposits  and  the  Nevada 
silver  ores  made  increased  quicksilver  output  essential. 

The  older  European  production  of  quicksilver  was  from 
Spain  and  Austria,  and  at  the  close  of  the  Napoleonic  wars 
the  combined  output  was  at  the  rate  of  around  1200  tons 
annually,  of  which  1000  tons  was  contributed  by  Spain. 
By  1855  the  world  total  had  about  doubled,  the  bulk  of 
the  increase  being  furnished  by  the  opening  of  quicksilver 
mines  in  California.     This  increase  continued  at  a  slow  rate, 


172  COAL,  IRON  AND  WAR 

but  before  1880  a  world  total  of  around  4000  tons  annually 
had  been  reached,  and  this  has  not  been  much  exceeded  in 
the  four  decades  that  have  followed.  There  was  in  reality 
a  slow  but  steady  decline  in  quicksilver  output,  from  the 
late  seventies  on,  the  total  falling  to  around  3200  tons  by 
1885.  From  an  extreme  low  point  in  1891,  however,  the 
output  very  gradually  rose  to  a  new  maximum  of  4200  tons, 
only  to  fall  again  below  3000  tons  in  1907.  Since  this  last 
date  there  has  been  another  slow  and  very  small  rise  in 
output,  bringing  the  current  annual  production  again  a 
little  above  4000  tons. 

The  world*s  output  of  the  present  day  is  still  derived 
from  much  the  same  sources  as  seventy  years  ago.  Spain 
accounts  for  two-fifths  of  the  total,  and  Italy,  Austria  and 
California  for  about  one  fifth  each,  varying  a  little  in  out- 
put and  rank  from  year  to  year. 

For  a  decade  preceding  the  war  quicksilver  prices  fluc- 
tuated around  $40  per  "flask"  of  75  pounds,  or  about 
$1000  to  1500  per  metric  ton.  If  it  had  not  been  for 
strong  International  control,  there  is  no  way  of  determining 
how  low  quicksilver  could  have  fallen  in  price.  The  war 
of  course  caused  a  rapid  advance  in  price,  but  the  war  is 
now  over. 

Though  deposits  of  quicksilver  or  its  ores  are  worked  in 
relatively  few  localities  at  present,  there  are  many  regions, 
particularly  In  western  America,  South  America  and  Asia, 
where  additional  supplies  could  be  developed  If  the  neces- 
sity arose.  Under  present  conditions  the  difiiculty  with 
quicksilver  Is  not  existing  or  future  scarcity,  but  the  secur- 
ing of  a  remunerative  price  for  the  salable  output  In  ordi- 
nary times.  Unless  some  unexpected  new  demand  for  mer- 
cury comes  to  light.  It  Is  possible  enough  that  it  may  be 
classed  with  lead  as  a  metal  likely  to  show  lower  rather 
than  higher  prices  in  future. 

The  situation  as  regards  quicksilver  ore  reserves  seems 
to  be  that,  though  not  very  large  in  absolute  tonnage,  they 


THE  SUPPLY  OF  COMMERCIAL  METALS       173 

are  more  than  ample  for  the  existing  demand,  or  for  any 
demand  that  seems  to  be  in  prospect.  If  we  had  any 
reason  to  think  that  quicksilver  would  find  some  new  or 
newly  enlarged  chemical  or  industrial  use  in  the  near  future, 
so  that  there  might  perhaps  be  an  effective  demand  for  50 
thousand  tons  of  mercury  annually  by  1930,  it  would  be 
difficult  if  not  impossible  to  meet  this  situation  from  known 
ore  deposits.  But  actually  the  quicksilver  output  increased 
only  18  per  cent,  during  the  last  active  decade,  and  unless 
this  rate  changes  markedly  the  demand  around  1930  will 
not  exceed  six  thousand  tons  a  year,  and  may  indeed  be 
less. 

Nickel.  We  may  profitably  turn  from  an  old  and  ap- 
parently dying  metal  to  one  whose  recent  growth  promises 
a  very  much  more  important  future. 

Metallic  nickel  seems  to  have  been  known  in  China  for 
centuries,  reaching  trade  in  the  form  of  a  copper-nickel- 
zinc  alloy  or  bronze.  But  its  European  history  is  much 
shorter,  the  earliest  European  production  of  metallic  nickel 
not  dating  back  a  century.  This  earliest  output  was  from 
Germany  and  England,  and  the  ores  used  as  a  basis  were 
chiefly  from  Hungary  and  Norway.  With  the  invention 
and  rapidly  increased  use  of  the  copper-nlckel-zinc  alloy 
called  argentan  or  German  silver,  and  with  the  adoption 
of  copper-nickel  for  subsidiary  coins  by  many  nations,  the 
nickel  Industry  became  more  Important.  From  a  total  of 
less  than  one  hundred  tons  annually  around  1850,  It  rose 
to  some  600  tons  by  1880.  So  far  the  sources  of  ore 
supply  had  not  been  changed. 

From  1880  onward  the  nickel  Industry  was  marked  by 
Increased  output,  Increased  ore  supplies,  and  new  uses  for 
the  product.  The  French  colony  of  New  Caledonia  began 
shipments  in  the  late  seventies,  and  by  1888  the  world's 
nickel  production  amounted  to  some  1700  tons,  of  which 
almost  1500  was  derived  from  New  Caledonia  ores, 
smelted   and   refined   In   Germany,    France    and   England. 


174  COAL,  IRON  AND  WAR 

During  this  period  the  price  of  metallic  nickel  was  declining 
steadily,  from  three  dollars  a  pound  in  the  seventies  to 
not  much  over  one  dollar  by  1882,  and  to  around  60  cents 
a  pound  during  the  later  eighties. 

In  1889  a  new  nickel  ore  supply  began  to  reach  the 
market,  that  from  the  Sudbury  field  in  Ontario,  Canada. 
Within  three  years  this  became  a  very  important  factor, 
exceeding  the  shipments  from  New  Caledonia,  and  effect- 
ing such  a  sudden  change  in  the  industry  that  the  metallic 
nickel  output  more  than  doubled,  from  about  two  thousand 
tons  in  1889  to  five  thousand  by  1891.  This  growth  ceased 
for  a  time,  for  the  business  of  the  world  was  passing  through 
the  depressed  period  which  did  not  culminate  until  1897,  ^^^ 
during  these  years  the  world  output  of  nickel  remained  al- 
most stationary. 

With  the  resumption  of  world-wide  business  activity 
after  1898,  the  nickel  industry  progressed  at  more  than 
the  average  rate,  and  the  world  output  reached  over  ten 
thousand  tons  by  1903.  Of  this  about  three  fifths  was 
produced  from  Canadian  and  two-fifths  from  New  Cale- 
donian ores.  The  countries  in  which  the  world  output  of 
metallic  nickel  was  refined  were  the  United  States,  Great 
Britain,  Germany  and  France.  Of  these  the  United  States 
refined  over  half  of  the  total. 

During  the  decade  which  followed,  down  to  the  com- 
mencement of  the  World  War,  the  nickel  output  increased 
to  over  thirty  thousand  tons  annually.  At  the  commence- 
ment of  the  war  Canada  was  furnishing  ^.he  ore  for  almost 
25  thousand  tons  of  this  total.  The  first  year  of  the  war 
depressed  the  industry,  but  when  It  was  finally  understood 
that  a  war  required  munitions  the  nickel  industry  was  one 
of  the  first  to  be  affected,  and  before  the  end  of  the  war 
the  Canadian  output  had  doubled.  Part  of  this  Canadian 
increase  went  to  take  the  place  of  New  Caledonian  ship- 
ments, which  were  naturally  uncertain,  but  the  remainder 
went  to  increase  the  total  metallic  nickel  output. 


THE  SUPPLY  OF  COMMERCIAL  METALS       175 

In  any  consideration  of  the  future  of  nickel,  we  must 
recall  that  during  the  last  few  decades  its  industrial  appli- 
cations have  broadened  amazingly.  Its  chief  uses  are  now 
no  longer  in  ornamental  alloys,  but  in  nickel-steels  and  other 
alloys  of  engineering  importance.  The  promise  seems  to 
be  for  largely  increased  demand,  and  to  meet  this  the 
Canadian  and  New  Caledonian  ore  deposits  are  ample  to 
guarantee  supplies  for  many  years  to  come.  In  addition, 
as  a  source  of  alloy-steels,  we  have  such  ores  as  the  Grecian 
and  Cuban  iron  ores,  containing  appreciable  nickel  contents. 

The  minor  metals;  summary.  In  the  preceding  discus- 
sion of  the  commercial  metals,  other  than  iron,  which  enter 
prominently  into  industrial  development,  there  has  been  an 
intentional  and  necessary  suppression  of  all  purely  technical 
detail,  whether  relating  to  the  geology  and  working  of  their 
ore  deposits,  their  metallurgy,  or  the  statistics  of  their  trade 
position.  It  has  been  desired  simply  to  summarize  the 
chief  factors  relating  to  each  of  these  metals  which  serve 
to  throw  light  on  its  present  trade  and  industrial  position, 
and  it  prospects  for  greater  supply  or  greater  use  in  the 
future  of  Industry. 

The  following  paragraphs  summarize  the  chief  points 
which  seem  to  have  been  developed  by  this  study,  so  far 
as  any  definite  conclusions  are  justified.  In  considering 
them  It  must  be  borne  In  mind  that  in  dealing  with  such  a 
complicated  problem  there  are  large  chances  for  error, 
arising  both  from  deficiencies  In  present  knowledge  and 
from  the  personal  equation.  My  own  Idea  Is  that  the 
greatest  chance  of  having  drawn  erroneous  conclusions  Is 
In  regard  to  the  future  trade  relations  and  prices  of  the 
two  metals  lead  and  zinc,  where  the  data  as  to  ore  reserves 
have  never  been  put  on  a  clear  and  definite  basis,  and  where 
the  commercial  conditions  are  very  complicated. 

Under  these  limitations  we  may  summarize  the  matter 
as  follows: 

I.  Of  the  metals  discussed  two  —  aluminum  and  nickel 


176  COAL,  IRON  AND  WAR 

—  promise  future  growth  much  more  rapid  than  the  aver- 
age. Both  have  ample  ore  supplies  to  carry  out  this 
growth. 

2.  Copper  and  zinc  demand  should  grow,  in  future,  at 
least  as  fast  as  the  demand  for  steel,  and  perhaps  some- 
what faster.  In  both  cases  a  largely  increased  demand 
may  throw  some  strain  on  known  ore  deposits.  This  would 
induce  a  normally  higher  range  of  prices  for  these  two 
metals,  if  this  effect  is  not  masked  by  lower  general  com- 
modity prices. 

3.  Tin  seems  to  be  getting  very  scarce  during  years  of 
good  trade,  and  unless  some  new  sources  of  ore  supply  are 
discovered  will  probably  not  be  produced  in  sufficient  quan- 
tity to  fill  the  demand.  In  some  of  its  uses  it  may  be  re- 
placed by  zinc;  in  others  by  aluminum. 

4.  Lead  has  an  uncertain  commercial  position,  and  there 
seems  to  be  rather  more  danger  of  future  over-production 
than  of  scarcity. 

5.  Quicksilver  shows  little  sign  of  increased  demand,  and 
is  likewise  in  chronic  danger  of  over-production. 

Taking  the  minor  commercial  metals  as  a  group,  there 
is  only  one  of  them  whose  supplies  or  future  prices  may 
cause  difficulty.  The  others  seem  to  be  present  in  sufficient 
quantity  to  permit  a  large  increase  of  use,  while  two  of 
them  appear  to  be  just  at  the  beginning  of  their  real  useful- 
ness to  industry. 


CHAPTER  XIV 

CHEMICAL  AND  STRUCTURAL  MATERIALS 

The  two  groups  of  manufacturing  raw  materials  which 
remain  to  be  discused  are  the  chemical  raw  materials  and 
the  structural  materials.  These  two  differ  widely  in  their 
industrial  importance  and  in  their  probable  future  growth. 
The  first,  including  the  raw  materials  used  as  a  basis  for 
the  chemical  industries,  will  in  all  probability  show  in  future 
a  rate  of  growth  even  faster  than  that  of  the  steel  industry, 
with  a  more  widely  developed  range  of  products  each  de- 
cade. Most  of  the  structural  materials,  on  the  other  hand, 
tend  to  exhibit  a  rather  slow  rate  of  growth  in  output, 
which  on  the  average  may  be  not  much  faster  than  the  rate 
of  increase  of  population. 

Chemical  Raw  Materials 

The  groups  of  raw  materials  discussed  in  preceding 
chapters  represent  to  a  large  extent  the  past  and  present 
of  industrialism,  while  the  group  now  to  be  briefly  con- 
sidered represents  its  future.  For,  whatever  we  may  think 
as  to  the  future  rate  of  growth  of  the  steel  industry,  for 
example,  we  are  running  little  risk  of  error  in  assuming 
that  the  growth  of  the  chemical  industries  will  be  still  more 
rapid. 

We  have  already  noted,  while  discussing  the  uses  of  coal, 
the  great  and  increasing  important  chemical  industries  which 
utilize  it  as  a  raw  material.  In  the  present  place  we  may 
therefore  confine  attention  to  the  heavy  chemical  industries, 
which  supply  the  chief  acids  and  bases  used  in  the  manufac- 
ture or  treatment  of  later  products.  These  are  derived, 
in  very  large  part,   from  natural  mineral   raw  materials. 

The  chief  ba§es  used  in  the  chemical  industries  are  lime, 

177 


178  COAL,  IRON  AND  WAR 

magnesia,  potash  and  soda;  and  their  necessary  supply  is 
secured  by  treatment  of  limestone,  salt,  and  certain  natural 
potash  and  magnesian  compounds.  The  chief  acids  — 
sulphuric,  hydrochloric  and  nitric  —  are  also  secured  almost 
exclusively  from  mineral  raw  materials,  some  of  which  at 
the  same  time  furnish  a  useful  base  in  addition  to  the  acid. 
In  addition  to  these  purely  chemical  raw  materials,  used 
in  further  manufacture,  some  attention  may  profitably  be 
paid  to  the  question  of  phosphates,  because  of  their  direct 
influence  on  food  supplies  and  indirect  influence  on  future 
industrial  development. 

Sulphur.  The  sulphuric  acid  supply  required  by  the 
chemical  industries  of  the  world  is  derived  from  three  dis- 
tinct but  related  sources.  There  are,  first  of  all,  certain 
deposits  of  native  sulphur  in  the  United  States  and  else- 
where, and  some  of  these  are  very  large  and  very  cheaply 
operated.  Second  in  importance  at  present,  from  a  com- 
mercial standpoint,  is  the  supply  of  sulphuric  acid  derived 
by  roasting  iron  pyrites  specially  mined  for  that  purpose. 
Third  in  present  importance,  but  perhaps  first  in  its  future 
effects  on  the  industry,  is  the  large  and  growing  supply 
of  acid  obtained  as  a  by-product  from  metal  smelters  and 
reducing  works  of  various  sorts.  This  last  source  of  sup- 
ply will  be  developed  more  extensively  each  year,  and  the 
prospects  are  that  in  future  sulphuric  acid  will  reach  a 
lower  range  of  prices  than  it  has  in  the  past. 

In  order  to  get  some  idea  of  the  present  relative  impor- 
tance of  the  three  sources  of  sulphuric  acid,  we  may  note 
that  of  the  three  million  tons  of  acid  produced  in  the  United 
States,  a  little  over  half  is  made  from  domestic  and  im- 
ported pyrite,  about  one  quarter  from  domestic  sulphur, 
and  about  one  fifth  from  smelter  gases. 

As  to  the  supplies  of  original  raw  materials,  that  of 
pyrite  is  very  widely  distributed,  while  sulphur  is  more 
closely  localized.  Of  a  world  output  of  some  three  million 
tons  of  pyrite  annually,  Spain  commonly  supplies  close  to 


CHEMICAL  AND  STRUCTURAL  MATERIALS       179 

one  million,  while  Norway,  Portugal,  United  States,  France, 
Italy  and  Germany  each  produce  from  200,000  to  400,000 
tons,  the  remainder  being  widely  scattered.  The  sulphur 
supply  is  of  around  nine  hundred  thousand  tons:  Italy  fur- 
nishes over  half,  and  the  United  States  most  of  the  re- 
mainder, with  Japan  as  the  only  other  serious  producer. 

Nitrates.  The  world's  supply  of  nitrates,  for  use  in  the 
manufacture  of  explosives,  fertilizers  and  other  chemical 
products,  is  now  derived  almost  exclusively  from  the  de- 
posits of  natural  sodium  nitrate  in  northern  Chile.  These 
deposits  are  large,  as  compared  with  current  demands,  and 
even  the  best  efforts  of  a  monopoly  supervised  by  the 
Chilean  Government  has  not  been  able  to  do  more  than 
keep  output  and  prices  under  some  small  degree  of  control. 
In  ordinary  times  the  Chilean  deposits  can  swamp  any  pos- 
sible competitive  supply,  and  knowledge  of  this  fact  has 
in  the  past  operated  to  prevent  the  development  of  smaller 
and  less  well-located  deposits  which  are  known  to  exist 
elsewhere. 

The  Chilean  deposits  have,  however,  one  marked  defect 
which  was  brought  out  sharply  during  the  World  War; 
and  which  would  appear  in  still  more  disastrous  form  in 
case  of  a  war  between  the  United  States  and  any  power 
having  an  active  surface  or  submarine  fleet  in  the  Pacific 
Ocean.  The  defect  is  that  the  distribution  of  the  output 
is  entirely  by  sea,  and  that  the  steamers  carrying  the  nitrate 
must  make  a  long  run  along  open  coasts.  We  must  there- 
for consider  that  nitrate,  though  the  natural  supply  is  more 
than  ample,  is  likely  to  be  entirely  cut  off'  during  war  con- 
ditions. 

In  default  of  a  supply  of  Chilean  nitrate,  a  country 
would  have  to  fall  back  upon  either  (a)  local  supplies  of 
natural  potash  or  soda  nitrates,  (b)  nitrogen  extracted 
electrically  from  the  air,  or  (c)  nitrates  manufactured  from 
coal  or  lignite.  All  of  these  modes  of  securing  nitrate  sup- 
plies are  technically  feasible,  and  none  are  absolutely  pro- 


i8o  COAL,  IRON  AND  WAR 

hibitive  as  to  cost  under  war  conditions,  though  in  normal 
times  none  of  them  can  at  present  compete  with  the  natural 
Chilean  supply. 

Salt.  Common  salt,  or  chloride  of  sodium,  occurs  in  the 
form  of  extensive  natural  deposits  in  many  parts  of  the 
world;  and  its  supply  in  this  form  is  practically  unlimited 
as  compared  with  the  demand.  Further  than  this,  how- 
ever, there  are  in  many  regions  brines  or  natural  salt  waters 
which  can  be  evaporated  profitably  even  under  ordinary 
trade  conditions.  Finally,  even  ordinary  sea-water  can  be 
used  as  a  source  of  commercial  salt  under  favorable  climatic 
conditions.  So  that  there  can  be  no  possibiHty  of  a  scarcity 
in  the  supply  of  this  very  important  chemical  raw  material, 
and  its  future  prices  are  likely  to  range  in  close  accordance 
with  the  general  trend  of  commodity  prices. 

The  actual  salt  output  of  the  world  is  also  widely  dis- 
tributed, the  United  States  leading  with  some  four  million 
tons  annually,  followed  closely  by  Germany  and  Great 
Britain,  and  these  in  turn  by  numerous  others.  The  output 
of  salt,  all  over  the  world,  increases  along  with  the  growth 
of  the  chemical  industries,  but  the  foreign  trade  in  salt  is 
of  less  and  less  importance,  relatively  to  the  total.  The 
reason  for  this  is  clear  enough,  for  a  country  cannot  base 
a  large  chemical  industry  on  bought  and  imported  salt  sup- 
plies; either  a  native  salt  supply  is  developed,  or  the  chem- 
ical industry  fails  to  grow. 

Lime.  The  most  important  of  the  bases  used  in  the 
chemical  industries  is  lime.  This  is  normally  derived  from 
the  burning  of  limestone,  and  as  that  rock  takes  up  a  very 
large  proportion  of  the  crust  of  the  earth  there  is  no  danger 
that  we  will  ever  run  short  in  supply. 

The  quantity  of  lime  used  as  a  chemical  raw  material, 
for  one  use  or  another,  is  very  doubtful;  it  may  amount 
to  three  or  four  million  tons  as  a  world  total.  It  enters 
into  the  chemical  trades  not  only  in  the  manufacture  of 
the  heavy  chemicals,  but  through  its  uses   as  a  chemical 


CHEMICAL  AND  STRUCTURAL  MATERIALS       i8i 

reagent  in  a  number  of  entirely  different  industries,  such 
as  the  paper,  leather  and  sugar  manufactures. 

Potash.  In  dealing  with  potash,  we  come  again  as  in 
the  case  of  nitrates  on  a  material  whose  normal  commercial 
supply  is  very  large  but  also  very  closely  localized  geo- 
graphically. The  commercial  output,  used  like  nitrate 
chiefly  for  fertilizers  and  explosives,  is  derived  almost  en- 
tirely from  the  deposits  of  natural  potash  salts  in  the  former 
German  Empire.  The  German  Government  did  its  best 
to  restrain  over-competition  in  the  output  of  these  deposits, 
but  they  are  so  large  and  so  cheaply  operated  that  even 
a  Government-aided  monopoly  found  it  difficult  to  keep 
the  output  down  and  the  prices  up.  It  is  merely  another 
proof  of  the  fact  that  durable  monopolies  must  be  based, 
in  the  last  analysis,  on  natural  scarcity;  and  that  even  an 
autocratic  government  can  not  do  much  in  the  way  of  hold- 
ing up  prices  in  the  face  of  an  over-abundant  natural  sup- 
ply. 

As  with  nitrates,  substitute  supplies  for  European  potash 
could  be  furnished  during  war  times,  these  emergency  sup- 
plies coming  from  various  mineral  or  vegetable  raw  ma- 
terials, and  during  the  World  War  this  was  done  to  some 
extent.  The  chief  possible  sources  are  certain  rather  com- 
mon minerals  —  glauconite,  feldspar,  etc. —  and  some  of 
the  seaweeds.  If  there  were  any  guarantee  that  future 
potash  prices  would  be  high,  or  if  the  government  continued 
to  aid  development  by  duties  or  by  direct  subsidy,  some  of 
these  alternative  supplies  could  be  kept  in  action  during 
peace  times,  as  a  guarantee  against  future  contingencies, 
for  the  technical  features  have  been  worked  out  success- 
fully enough. 

Phosphates.  Extensive  deposits  of  lime  phosphates  in 
one  form  or  another  are  found  in  many  parts  of  the  world. 
As  the  higher  grade  or  more  available  parts  of  these  natural 
deposits  are  gradually  worked  out,  there  may  be  increased 
prices  for  the  product,  but  the  natural  supply  of  low-grade 


i82  COAL,  IRON  AND  WAR 

phosphates  Is  so  large  that  the  question  of  final  exhaustion 
need  not  enter. 

More  important,  however,  as  affecting  the  question  of 
future  phosphate  supply  and  prices,  are  the  developments 
which  may  fairly  be  expected  from  the  steel  industry.  The 
cheapest  and  easiest  way  of  making  a  good  fertilizer,  after 
all,  is  by  treating  high-phosphorus  pig  iron  in  either  the 
Bessemer  converter  or  the  open-hearth.  The  slags  thus 
produced  have  been  for  a  number  of  years  an  important 
item  in  German  and  English  trade,  and  as  the  steel  indus- 
try develops  along  more  economical  lines  we  may  reason- 
ably expect  to  see  a  much  greater  growth  in  the  manufacture 
of  phosphate  slag  as  a  by-product. 

There  is  an  interesting  and  important  point  about  the 
geographic  distribution  and  the  national  development  of 
phosphate  rock  supplies  which  usually  escapes  notice. 
Though  the  raw  material  in  one  form  or  other  is  really 
very  widely  distributed,  the  commercial  output  is  practi- 
cally all  in  the  hands  of  two  nations.  Of  the  six  million 
tons  of  phosphate  shipped  during  normal  years  just  about 
half  comes  from  the  United  States  and  the  other  half  from 
France  and  French  colonies. 

Structural  Materials 

There  are  three  main  groups  or  classes  of  structural 
materials  of  mineral  origin  used  by  the  engineer,  in  addition 
of  course  to  the  iron  and  steel  which  have  previously  been 
considered. 

The  classes  now  to  be  noted  are  ( i )  clay  products  used 
structurally,  such  as  brick,  tile,  etc.;  (2)  cementing  materials, 
including  Portland  and  other  cements,  lime,  plasters,  etc., 
and   (3)   building  stones. 

Of  these  three  classes  the  building  stone  is  used  in  natural 
condition,  while  the  clay  products  and  cementing  materials 
have  undergone  some  degree  of  manufacture  before  being 
fit  for  engineering  use.     But  in  all  three  cases  the   raw 


¥ 


¥ 


I 


CHEMICAL  AND  STRUCTURAL  MATERIALS       183 

materials  used  are  natural  rocks,  such  as  limestones,  clays, 
granites,  slates,  etc.,  which  make  up  enormous  beds  or  masses, 
and  are  widely  distributed  over  the  earth's  surface.  There 
is  no  possibility  of  actual  exhaustion  of  any  of  these 
materials,  and  except  locally  there  is  no  danger  of  such 
scarcity  as  to  cause  rise  in  price.  The  danger  is  in  fact  all 
the  other  way,  threatening  the  manufacturer  rather  than 
the  consumer.  It  would  be  entirely  feasible,  from  a  raw 
material  standpoint,  provided  a  steady  demand  justified  the 
erection  of  sufficient  plants,  to  produce  one  hundred  times 
the  amount  of  stone,  bricks  or  cement  now  annually  used, 
without  any  necessary  advance  in  prices. 


I 


PART  III 

THE  CAUSES  AND  EFFECTS  OF  INDUSTRIAL 

GROWTH 


CHAPTER  XV 
THE  FACTORS  OF  INDUSTRIAL  EVOLUTION 

In  the  course  of  the  historical  sketch  which  comprised 
the  first  part  of  this  volume,  we  saw  that  during  the  past 
century  many  nations  had  been  affected,  at  one  time  or  an- 
other, and  to  a  greater  or  lesser  extent,  by  a  remarkable  in- 
dustrial development,  accompanied  by  great  increases  in 
output  of  commodities,  in  average  wealth,  and  in  population, 
and  marked  also  by  great  social,  industrial  and  political 
changes.  We  have  seen  also  that  the  progress  was  not 
uniform  from  decade  to  decade,  but  that  the  developments 
came  in  great  waves,  of  alternate  rapid  growth  and  rela- 
tive slow  growth  or  even  depression;  and  that  to  a  large 
extent  all  countries  alike  were  affected  by  these  rhythmic 
variations  in  rate  of  progress. 

There  is  one  point  to  which  attention  must  be  called  at 
the  outset,  and  this  relates  to  the  very  fact  of  industrial 
growth  itself.  We  have  become  so  accustomed  now  to  the 
idea  that  any  large  country  shows  a  steady  annual  increase 
in  its  output  of  staple  goods  that  we  are  tempted  to  look 
upon  this  as  a  condition  which  has  always  existed,  and 
which  requires  neither  attention  nor  explanation.  But  as  a 
matter  of  fact  industrial  growth  has  not  always  existed  — 
there  have  been  whole  centuries  and  series  of  centuries 
when  the  production  of  goods  showed  little  or  no  increase, 
and  even  as  late  as  the  eighteenth  century  there  was  a  period 
of  over  fifty  years  when  the  basal  industry  of  Great  Britaii>. 
—  the  iron  industry  itself  -^^  actually  diecreased  in.  output 
each  year. 

There  have  thus  been  long  periods  in  the  world's  his.- 
tory  when  there  was  no  trace  of  what  we  are  now  accus- 
tomed to   consid,ier  as  merely  nprn^al  material  progre^js,. 

187 


1 88  COAL,  IRON  AND  WAR 

And  In  saying  this  we  need  not  go  back  for  example  to  the 
fourth  and  fifth  centuries,  when  our  barbarian  forefathers 
broke  through  the  last  defenses  of  the  crumbling  Empire 
and  demolished  what  of  civilization  they  found,  but  to 
much  more  recent  periods.  Since  the  time  of  the  Norman 
conquest  of  England  there  have  been  long  periods  during 
which  the  European  production  of  iron,  for  example,  was 
so  little  that  it  did  not  more  than  compensate  for  the  loss 
by  rusting  and  destruction  during  the  same  period,  so  that 
at  its  end  the  world  supply  would  be  actually  less  than  at  its 
beginning.  During  those  centuries  steady  growth  in  out- 
put was  not  a  normal  thing  in  any  Industry,  but  a  very  re- 
markable and  abnormal  matter.  To-day,  though  our  pres- 
ent period  of  rapid  and  unchecked  Industrial  expansion  dates 
back  not  much  over  a  century,  we  have  become  so  accus- 
tomed to  progress  that  we  have  ceased  to  wonder  at  the 
marvel  of  it. 

It  may  therefore  be  novel  as  well  as  advantageous  to 
our  present  study.  If,  instead  of  accepting  Industrial  growth 
as  a  matter  of  course,  we  make  some  attempt  to  outline  the 
conditions  which  cause  It  and  the  factors  which  have  de- 
termined its  recent  rate  of  expansion. 

The  phenomena  observed  are  of  great  extent,  both  geo- 
graphically and  chronologically,  for  they  have  covered  all 
the  continents  and  have  been  apparent,  in  about  their  pres- 
ent intensity,  for  well  over  a  century.  For  these  reasons 
the  factors  which  caused  them  can  not  be  given  purely  local 
explanations,  as  is  so  often  the  case  when  the  development 
of  a  single  country  Is  considered,  apart  from  that  of  the 
rest  of  the  world.  At  the  outset,  for  example,  It  was  easy 
enough  to  explain  the  sudden  development  of  England  as 
being  caused  by  the^native  manufacturing  genius  of  the 
English  workman.  That  explanation  served  for  half  a 
century,  and  It  is  still  of  service  to  British  politicians,  but  it 
would  hardly  be  accepted  elsewhere  as  an  adequate  explana- 
tion.    Later,  when  America  began  to  make  evident  manu- 


THE  FACTORS  OF  INDUSTRIAL  EVOLUTION      189 

facturing  advances,  slower  than  commonly  supposed,  there 
was  a  somewhat  grudging  admission  abroad  that  the  native 
sharpness  of  the  Yankee  might  serve  almost  as  well  as 
British  genius.  Still  later,  it  was  necessary  to  add  the  ex- 
planation that  the  plodding  industry  of  the  German  also 
had  fair  industrial  effects.  The  case  of  Japan  offered 
greater  difficulty,  but  monkey-like  imitativeness  was  finally 
offered  as  a  complete  explanation  of  a  really  very  remark- 
able phenomenon.  Just  what  explanation  will  be  given 
when  China  joins  the  group  of  leading  industrial  nations  is 
still  uncertain,  but  one  may  be  sure  that  even  then  there  will 
be  many  people  who  will  try  to  explain  it  in  terms  of  innate 
racial  qualities. 

Another  widely  accepted  group  of  explanations  are  those 
which  credit  the  advances  to  the  forms  of^ government  en- 
joyed, or  thevgovernmental  policies  adopted.  These  too 
are  very  well  so  long  as  we  confine  attention  to  the  progress 
of  a  single  nation,  but  they  become  difficult  when  a  broader 
view  is  taken.  Can  one  take  seriously  the  explanation  that 
progress  comes  because  we  have  a  democratic  republic,  or 
a  democratic  monarchy  or  an  autocratic  paternalism  when 
he  compares  the  results  attained  under  such  very  diverse 
forms  of  government  as  have  been  enjoyed  by  the  United 
States,  Japan,  France,  Germany  and  England?  And  what 
shall  we  say  to  the  man  who  can  give  all  the  credit  to 
specific  government  policies  when  we  consider  what  has 
happened  under  free  trade  In  Great  Britain,  under  steady 
high  protection  in  France  and  Germany,  under  violent  alter- 
nations of  policy  In  America? 

The  explanations  which  are  so  freely  offered  during  a 
political  campaign,  and  which  are  serviceable  enough  for 
their  immediate  purpose,  do  not  after  all  seem  to  cover  the 
case.  Perhaps  it  would  be  as  well  to  abandon  pre-conceived 
theories,  and  attempt  to  build  up  an  explanation  from  the 
various  facts  which  we  encounter  in  different  industries  to- 
day.    The  final  result  may  be  less  simple  than  racial  genius. 


I90  COAL,  IRON  AND  WAR 

or  protection  or  democracy  —  but  it  may  be  nearer  the 
truth. 

Causes  of  industrial  expansion.  Instead  of  going  back 
to  a  theoretical  primitive  community  on  a  desert  island, 
and  endeavoring  to  follow  out  its  probable  line  of  develop- 
ment, let  us  apply  the  same  effort  to  conditions  of  to-day, 
which  we  can  check  up  much  more  easily  and  accurately. 
We  have  just  passed  through  a  period  of  great  expansion  in 
American  trade  and  manufactures,  marked  by  heavy  in- 
creases in  output  of  commodities,  and  by  a  very  general 
rise  in  prices.  With  a  few  minor  interruptions  this  has 
lasted  for  ten  years ;  with  one  more  serious  exception  it  has 
really  lasted  twenty  years.  During  that  period  practically 
every  American  business  and  industry  has  grown,  and  some 
have  grown  very  remarkably.  If  we  can  get  some  idea  of 
the  various  reasons  for  the  individual  growths,  it  should 
be  possible,  by  comparison,  to  come  to  some  more  definite 
idea  as  to  the  general  causes  of  industrial  expansion. 

This  result  could  be  attained  if  we  were  to  select  a  large 
number  of  successful  American  manufacturers  and  mer- 
chants, engaged  in  different  lines  of  business,  and  ask  each 
of  them;  ''Why  has  your  particular  firm  or  corporation 
been  able  to  increase  its  output  during  the  past  ten  years?  " 
The  explanations  given  would  be  widely  variant,  on  their 
face,  but  they  would  on  more  careful  examination  be  seen 
to  fall  into  a  small  number  of  pretty  definite  groups. 

For  example,  many  of  our  informants  would  mention 
the  effects  of  the  European  War  as  increasing  their  markets 
through  cutting  off  of  European  competition.  Still  others 
would  again  refer  to  the  war  as  having  created  increased  and 
urgent  demand  for  their  commodities  —  in  such  lines  as 
munitions,  shipping,  oil  and  copper.  The  aluminum  manu- 
facturer might  add  that  in  addition  to  the  absence  of  for- 
eign competition,  there  was  the  high  current  price  of  copper, 
which  permitted  broader  market  for  aluminum  wire  and 
Qables..     The  cement,  maker,  not  affected,  favorably  by  the 


THE  FACTORS  OF  INDUSTRIAL  EVOLUTION      191 

war,  might  fairly  credit  part  of  his  increased  output  during 
earlier  years  to  the  increasing  cost  of  lumber  and  the  con- 
sequent substitution  of  cement.  The  manufacturer  of 
luxury  goods,  as  silks,  might  explain  that  people  were  buying 
more  expensive  goods  than  formerly.  The  maker  of  agri- 
cultural implements  would  say,  perhaps,  that  there  had  been 
good  crops  in  the  Argentine,  and  that  steamer  rates  had 
been  low  until  the  war  came.  Our  railroad  managers  would 
admit  that,  even  under  government  regulation  and  tem- 
porary government  control,  the  tonnage  moved  tended  to 
increase  with  the  increased  population,  and  the  manufacturer 
of  coffins  or  of  baby-carriages  would  give  the  same  reason 
for  the  growth  of  his  business.  The  maker  of  certain  steel 
products  could  say  that,  even  before  the  war,  his  lowering 
costs  permitted  him  to  reach  some  foreign  markets  which 
had  earlier  been  impossible. 

Taking  this  mass  of  partial  explanations,  it  will  be  seen 
that  they  all  involve  either  sales  to  a  greater  population, 
or  sales  at  a  greater  rate  per  capita,  or  both.  ^They  all 
imply  that  the  market  for  the  commodity  has  been  expanded 
in  some  way,  but  they  offer  a  large  variety  of  causes  for  the 
expansion.]  It  may  be  well  to  sumarize  these  causes,  not 
necessarily  in  order  of  importance,  to  clear  up  the  results 
so  far  secured. 

We  may  assume  that  in  every  case  increase  in  output  is 
caused  by  expansion  of  market,  and  that  this  in  turn  be 
due  to : 

'     a.  Normal  growth  of  population,  by  birth  or  immigration. 

b.  Increased    consumption    per    capita,    due    to    higher 
standard  of  living,  to  new  uses  for  the  product,  or 

to  substitution  for  other  products. 

c.  Increased  ease  of  access  to  broader  markets,  through 
improvements  in  transportation  or  new  discoveries. 

As  thus  grouped,  the  factors  which  tend  to  bring  about  In- 


192  COAL,  IRON  AND  WAR 

creased  output  of  commodities  appear  very  simple,  but  in 
reality  they  act  and  react  on  each  other  in  complex  fashion, 
so  that  the  actual  result  in  any  given  case  is  not  necessarily 
obvious,  and  it  is  difficult  at  times  to  say  which  is  the  im- 
mediate cause  and  which  the  effect.  For  example,  the  de- 
velopment of  an  industry  somewhere  may  in  itself  bring 
about  increase  in  the  local  population,  and  the  increased 
wealth  of  the  community  may  then  bring  about  even  greater 
local  demand  for  the  product.  The  increased  output  would 
in  turn  bring  about  decreased  manufacturing  costs,  and  this 
would  again  open  new  fields  of  use  for  the  product.  Now 
this  is  not  an  imaginary  sketch,  for  something  like  the  com- 
plicated process  just  outlined  has  really  taken  place,  during 
the  past  century,  not  once  but  many  times,  at  many  dif- 
ferent places  and  in  connection  with  many  different  indus- 
tries. The  difficulty  is  that,  looking  back  over  the  history 
from  a  much  later  date,  it  is  often  difficult  to  get  a  clear 
idea  as  to  the  order  in  which  these  events  happened. 

There  is  one  error  which  is  frequently  made  in  this  con- 
nection, and  that  is  as  to  the  relation,  in  point  of  time, 
between  the  production  of  an  article  and  its  market.  It  is 
perfectly  true  that  a  commodity  must  be  made  before  it 
can  be  consumed,  but  in  general  it  is  not  made  until  its 
market  is  pretty  well  assured.  We  often  speak  carelessly 
of  early  industrial  growth  as  though,  at  some  given  time, 
the  furnacemen  of  England  had  said  — "  This  year  the 
British  output  of  pig  iron  must  be  100,000  tons.  Let  us 
develop  new  uses  for  this  amount."  Now  in  real  life 
such  a  procedure  would  not  result  in  the  development  of  the 
iron  industry,  but  in  the  bankruptcy  of  the  manufacturer. 

The  true  sequence  of  events  during  the  early  history  of 
any  industry  appears  to  be,  on  the  contrary,  that  new  or 
enlarged  markets  are  found,  and  that  the  output  expands 
in  order  to  fill  the  increased  demand;  that  for  a  long  time 
it  is  apt,  because  of  human  conservatism,  to  remain  below 


THE  FACTORS  OF  INDUSTRIAL  EVOLUTION       193 

the  demand;  so  that  prices  do  not  drop  immediately  as  the 
output  grows,  but  remain  high  and  even  increase.  At 
some  later  period  there  is  a  temporary  falling  off  in  demand, 
with  consequent  over-supply  and  lower  prices;  and  then  the 
factor  of  new  uses  is  likely  to  appear. 

In  any  case,  it  will  be  well  to  consider  in  turn  each  of  the 
three  factors  which  have  been  summarized  above  —  growth 
of  population,  increased  consumption  per  capita,  and 
broader  markets.  It  will  be  found  that  all  three  have 
acted  very  unequally  at  different  times  and  in  different  coun- 
tries. 

Growth  of  population.  Living  in  the  United  States,  in 
the  twentieth  century,  we  have  become  so  accustomed  to 
finding  that  the  population  of  our  country  increases  quite 
rapidly  that  we  are  apt  to  overlook  the  fact  that  all  the 
world  is  not  so  fortunate  even  now,  and  that  not  so  very 
long  ago  none  of  it  showed  a  rapid  growth  in  population. 
There  have  been  centuries  after  centuries  when  the  popu- 
lation of  England,  for  example,  was  essentially  stationary. 
There  have  been  hundreds  of  years  during  which  countries 
have  been  on  so  narrow  a  margin  of  safety  that  one  bad 
harvest  meant  serious  famine,  and  a  succession  of  three  or 
four  bad  crop  years  would  cause  a  heavy  decrease  in  the 
population.  Thanks  to  improvements  in  storage  and  in 
transport  we  have  now  a  far  greater  margin  of  safety,  but 
it  is  by  no  means  certain  that  the  earlier  conditions  can  not 
again  recur. 

Population  can  only  increase  rapidly  when  living  condi- 
tions are  relatively  easy;  and  each  increase  of  population 
will,  so  long  as  it  works,  tend  to  make  living  conditions  still 
easier  —  up  to  the  time,  at  least,  when  all  the  earth's  sur- 
face is  carefully  farmed.  On  the  other  hand,  each  day  or 
year  of  idleness  or  destruction  throws  us  back  again  toward 
the  conditions  of  the  Middle  Ages.  The  world  has  not 
yet  accumulated  such  a  surplus  of  supplies  that  it  can  afford 


194  COAL,  IRON  AND  WAR 

to  be  idle,  or  to  be  destructive.  That  is  the  real  basal  ob- 
jection to  both  war  and  syndicalism  —  that  they  reduce  pro- 
ductive effort,  which  we  can  not  yet  afford  to  relax. 

On  the  other  hand,  so  long  as  population  increases  and 
works,  there  Is  a  steady  increase  in  demand  for  most  com- 
modities, and  the  minimum  rate  of  increase  for  any  in- 
dustry will  tend  to  be  fixed  by  the  rate  of  increase  of  popu- 
lation. If  we  find  that,  over  a  series  of  years,  our  output 
of  some  special  commodity  is  not  increasing  at  least  as  fast 
as  the  population,  there  is  something  wrong  about  that  in- 
dustry —  either  its  raw  material  supplies  are  deficient,  or 
it  is  being  replaced  by  some  other  product. 

We  may  therefore  accept  the  rate  of  population  increase 
as  the  minimum  at  which  we  may  expect  an  industry  to  grow, 
and  it  will  be  of  interest  to  see  what  that  means  in  figures. 

It  is  convenient  to  use  the  term  normal  growth,  for  it  con- 
veys a  sufficiently  exact  idea  of  what  we  have  in  mind  —  i.e. 
the  increase  in  population  of  any  country  due  merely  to 
births  and  immigration,  and  disregarding  such  exceptional 
influences  as  wars,  natural  catastrophes,  or  annexations. 
Taken  In  this  broad  sense  it  is  a  serviceable  term,  even 
though  it  is  subject  to  criticism  In  detail.  For  as  soon  as 
we  come  to  examine  the  facts  we  see  that  there  Is  no  such 
thing  as  a  normal  rate  of  growth  for  population,  but  that  on 
the  contrary  the  prevailing  rate  varies  from  year  to  year, 
from  century  to  century,  from  class  to  class,  and  from  coun- 
try to  country. 

As  regards  the  facts,  we  have  fairly  accurate  figures  for 
later  years,  and  very  doubtful  estimates  for  world  popula- 
tion In  earlier  years,  covering  the  past  century  or  so. 
These  are  tabulated  on  page  195,  for  convenience  in  dis- 
cussion. 

As  soon  as  we  glance  at  these  figures,  one  aspect  of  the 
situation  presents  Itself  —  the  rapid  growth  of  American 
population  relative  to  that  of  the  world  in  general.  This 
was  in  part  due  to  the  fact  that  the  United  States  was  a  new 


Per  cent. 

Per  cent. 

increase 

United  States 

increase 

,  , 

3,930,000 

... 

,  . 

5,310,000 

35.1 

11.5 

7,240,000 

36.4 

9.5 

9,640,000 

33.1 

8.6 

12,870,000 

33.5 

12.2 

17,070,000 

32.7 

13.2 

23,190,000 

35.9 

12.1 

31,440,000 

35.6 

8.7 

39,820,000 

26.6 

9.9 

50,160,000 

26.0 

3.4 

62,950,000 

24.9 

3.7 

75,990,000 

20.7 

4.7 

91,970,000 

21.0 

THE  FACTORS  OF  INDUSTRIAL  EVOLUTION      195 


Year  World  population 

1790 

1800 640,000,000 

1810 

1820 780,000,000 

1830 847,000,000 

1840 950,000,000 

1850 1,075,000,000 

1860 1,205,000,000 

1870 1,310,000,000 

1880 1,439,000,000 

1890 1,488,000,000 

1900..'. 1,543,000,000 

1910 1,616,000,000 


and  unoccupied  country,  so  that  Its  entire  growth  took  place 
during  the  nineteenth  century.  But  it  was  in  part  due  to 
industrialism,  which  not  only  permitted  but  encouraged  this 
growth.  The  influence  of  the  industrial  factor,  as  distinct 
from  that  of  normal  growth,  is  shown  also  when  we  con- 
sider older  countries,  such  as  England  and  Germany.  We 
find  that  they  too  showed  higher  rates  of  growth  than  the 
rest  of  the  world,  though  lower  than  that  of  the  United 
States. 

England,  for  example,  whose  population  had  increased 
only  fifteen  per  cent.  In  the  entire  century  between  1651  and 
175 1,  showed  an  increase  of  almost  two  hundred  per  cent, 
in  the  century  which  succeeded;  her  population  increased 
as  fast  every  ten  years  as  during  an  entire  earlier  century; 
and  her  industrial  activities  permitted  their  maintenance  in 
more  comfort  than  had  ever  been  seen  before.  At  a  later 
period  Germany  showed  similar  Increases  in  rate  of  popu- 
lation increase,  so  that  In  the  period  18 16-19 10  her  popula- 
tion Increased  almost  three  hundred  per  cent.  France,  on 
the  other  hand,  showed  less  than  fifty  per  cent,  increase  dur- 
ing about  the  same  period. 


196  COAL,  IRON  AND  WAR 

If  we  take,  In  place  of  the  increase  in  per  cent,  per  decade, 
the  annual  rate  which  corresponds,  we  find  that  the  popu- 
lation of  the  world  has  increased  during  the  century  at  the 
rate  of  about  one  per  cent.,  compounded  annually.  But 
when  we  come  to  consider  the  three  industrial  leaders,  we 
find  increases  more  than  double  this  rate,  for  the  popula- 
tion of  the  United  States,  Germany  and  England  has  in- 
creased at  rates  ranging  from  two  to  three  per  cent,  a  year. 

Obviously  this  increased  population  accounts  for  part  at 
least  of  our  increased  demand  for  commodities,  but  it  does 
not  account  for  all  of  it.  When  we  were  studying  the  ques- 
tions of  coal  and  iron  output  we  found  that  for  many 
decades  the  world's  output  of  these  commodities  had  in- 
creased at  the  rate  of  over  four  per  cent,  annually,  while 
the  output  of  England,  Germany  and  the  United  States  had 
grown  at  a  higher  rate,  close  to  seven  per  cent.  We  come 
therefore,  to  see  that  the  United  States,  Germany  and  Eng- 
land have  for  a  century  or  more,  produced  the  two  basal 
manufacturing  materials  at  a  rate  which  increased  twice  as 
fast  as  the  rate  of  population  increases.  This  must  ob- 
viously have  involved  either  increased  consumption  per 
capita  of  the  home  markets,  or  access  to  new  markets.  Act- 
ually, in  all  three  cases,  both  these  factors  were  involved 
in  different  degrees. 

Increased  consumption.  In  a  world  whose  standard  of 
living  and  whose  requirements  are  substantially  unchanged 
as  the  years  go  by,  the  increase  in  population  will  bring 
about  a  pro  rata  increase  in  manufactures,  but  no  more  than 
this.  But  if  commodities  produced  are  being  continually 
applied  to  new  uses,  or  are  used  more  freely  in  old  ways, 
there  will  be  increased  consumption  per  capita. 

For  many  centuries  the  world  did  actually  remain  al- 
most fixed  in  its  standard  of  living  and  in  its  other  require- 
ments. Then,  gradually  at  first  but  with  increasing  momen- 
tum as  opportunity  increased,  there  came  about  a  heavily 
growing  demand  for  commodities  of  all  sorts,  not  only  for 


THE  FACTORS  OF  INDUSTRIAL  EVOLUTION       197 

these  of  final  use,  such  as  fdbds  and  clothing,  but  for  such 
as  were  to  be  applied  in  less  individual  and  immediate  ways. 
We  rarely  stop  to  consider  just  what  a  very  large  proportion 
of  the  coal  and  iron  we  produce  is  employed  merely  in 
transporting  other  commodities  from  one  place  to  another 
—  some  idea  perhaps  can  be  gained  if  we  reflect  that  in  the 
United  States  over  a  third  of  the  coal  we  consume  is  used 
as  railroad  and  shipping  fuel,  and  that  the  English  and 
German  proportions  must  be  about  the  same. 

In  any  case  there  are  complex  relations  between  the  fac- 
tors which  are  at  work,  for  'increased  population  not  only 
means  increased  demand  for  commodities,  but  increased 
facilities  for  supplying  them,  and  probably  decreased  cost 
per  unit  and  an  increase  in  the  general  wealth. 

Expanded  markets.  If  to  the  two  factors  already  noted 
we  add  the  expansion  of  markets,  or  increased  ease  of  ac- 
cess to  old  markets,  we  have  assembled  the  main  factors 
which  incite  great  industrial  development.  And  it  was  this 
last  factor,  so  far  as  we  can  tell,  which  played  the  greatest 
part  in  bringing  about  the  marvelous  expansion  of  British 
manufacturing  toward  the  close  of  the  eighteenth  century. 

The  earlier  part  of  the  eighteenth  century  saw  the  ac- 
quisition, by  England,  of  vast  new  markets;  the  closing 
decades  of  the  century  saw  the  rise  of  the  new  industrialism 
which  was  to  supply  them  with  commodities.  In  follow- 
ing out  the  purely  military  history  of  the  series  of  great 
wars  in  which  England  and  France  engaged  during  this 
period,  we  are  apt  to  overlook  their  commercial  and  in- 
dustrial effects.  To  sum  them  up  here,  it  need  only  be  said 
that  at  the  end  of  an  almost  continuous  struggle  lasting  from 
1740  to  1763,  Great  Britain  was  left  in  possession  of  India, 
Canada,  and  a  large  number  of  island  colonies  all  over  the 
globe.  Considered  merely  as  territory,  these  acquisitions 
would  not  have  been  of  serious  importance,  but  considered 
as  growing  markets,  absolutely  restricted  under  the  Navi- 
gation Acts  to  the  products  of  the  home  country,  they  fur- 


198  COAL,  IRON  AND  WAR 

nished  a  direct  incentive  to  British  manufacturing  enter- 
prise, and  were  thus  the  most  important  single  factor  in 
bringing  about  the  industrial  revolution  toward  the  close 
of  the  eighteenth  century.  The  external  effects  of  that 
great  change  in  industry  have  been  discussed  in  Chapter  I, 
and  there  is  no  need  to  retell  the  story  here. 

The  expansion  of  markets  which  so  affected  England  in 
1763,  however,  was  by  no  means  the  last  great  broadening 
of  markets  that  the  world  has  seen.  In  the  first  quarter  of 
the  nineteenth  century  there  was  the  great  development  of 
the  Mississippi  region  of  the  United  States,  and  a  less  im- 
portant development  of  South  American  markets  after  the 
Spanish  colonies  gained  their  freedom.  Still  later  there 
was  the  very  remarkable  growths  of  Australia  and  Cali- 
fornia, under  the  stimulus  of  the  great  gold  discoveries. 
Later  still,  well  toward  the  close  of  the  nineteenth  cen- 
tury, new  markets  were  opened  to  the  world  through  the 
expansion  westward  of  Canadian  and  Argentine  agricul- 
ture, and  the  re-opening  of  Africa  by  Europeans.  In  all  of 
these  cases  periods  of  world-wide  commercial  and  industrial 
activity  were  induced,  in  which  different  nations  shared  un- 
equally, because  of  their  unequal  natural  advantages,  or  be- 
cause of  unequal  political  conditions.  These  other  factors, 
which  served  to  aid  or  to  limit  national  development  may 
be  briefly  noted  now,  in  order  to  complete  the  record. 

Accessory  and  limiting  factors  Given  new  market  pos- 
sibilities, they  can  be  availed  of  by  a  given  nation  only  if  it 
has  goods  to  offer  and  convenience  of  access  to  the  market. 
In  order  to  produce  an  extensive  industrial  development, 
new  markets  require  that  the  country  which  enters  them 
must  possess  raw  materials,  fuel,  labor,  transport,  capital, 
and  that  it  be  not  unduly  hampered  by  its  government. 
These  matters  are  simple  enough,  but  they  are  often  over- 
looked, as  when  we  ascribe  the  slow  industrial  development 
of  Spain,  Italy,  and  South  America  to  racial,  political  or  re- 
ligious conditions.     It  is  not  the  presence  of  the  Church, 


THE  FACTORS  OF  INDUSTRIAL  EVOLUTION       199 

but  the  lack  of  Coal,  which  has  most  hampered  their  develop- 
ment along  modern  industrial  lines. 

During  the  past  century  some  of  these  factors  have  in- 
creased tremendously  in  importance,  while  others  have  be- 
come relatively  less  important.  Prior  to  the  perfecting  of 
the  steam  engine,  fuel  was  of  trifling  importance  to  a  na- 
tion, so  far  as  its  manufactures  and  foreign  trade  were  con- 
cerned, for  coal  did  not  until  near  the  end  of  the  eighteenth 
century  become  of  importance  for  either  factory  fuel  or  for 
transport  power.  But  after  that  perfecting  of  the  engine, 
coal  became  the  most  important  single  factor  which  served 
to  aid  or  limit  industrial  expansion,  after  new  markets  had 
once  furnished  an  incentive  for  such  expansion. 

Further,  the  adoption  of  steam  transport  and  later  of 
iron  ships,  though  they  aided  the  whole  world  by  furnish- 
ing cheaper  food  supplies  and  lower  freights,  gave  still 
greater  importance  to  the  country  which  possessed  fuel  and 
could  make  iron  cheaply.  In  fact,  from  1780  onward,  there 
has  been  a  steady  and  progressive  differentiation  going  on, 
in  wealth  and  power,  between  the  coal-producing  and  the 
coal-importing  countries.  So  far  as  we  can  see,  this  factor 
will  continue  to  act  in  future  with  no  less  strength,  and  per- 
haps for  a  time  in  still  greater  degree.  In  our  discussion 
of  the  coal  supplies  of  the  world  we  saw  the  reason  for  this 
condition,  and  noted  some  of  the  way  in  which  a  cheap  fuel 
supply  operates  to  increase  national  power. 

While  conditions  as  to  fuel  supply,  raw  material  supply 
and  transport  became  of  increasing  importance  as  time  went 
on,  the  political  factors  became  generally  of  less  importance 
in  their  relations  to  industry.  During  the  greater  part  of 
the  nineteenth  century  it  could  not  fairly  be  said  that  gov- 
ernment action  had  aided  very  strikingly  in  any  nation, 
while  on  the  other  hand  its  evil  effects  were  often  seen.  But 
this  condition  is  not  likely  to  endure,  for  with  the  increas- 
ing inter-dependence  of  industrial,  social  and  political  in- 
terests we  may  fairly  look  forward  to  an  increasing  amount 


200  COAL,  IRON  AND  WAR 

of  government  regulation  in  all  lines  of  activity.  The  trend 
in  this  direction  became  noticeable  late  in  the  last  century,  as 
we  will  see  later  in  discussing  the  progress  of  political  be- 
liefs (Chapter  XXI)  and  their  effect  on  industrial  develop- 
ment, and  the  World  War  has  rather  increased  than  lessened 
the  tendencies  in  this  direction. 

We  have  spoken,  so  far,  much  as  if  industry  had  been 
mentally  and  technically  stationary  during  the  past  century, 
and  as  if  its  progress  had  been  merely  along  the  line  of 
wider  markets  and  increased  output  of  commodities.  But 
this,  as  we  all  know,  would  be  a  very  unfair  statement  of  the 
case,  for  one  of  the  most  striking  facts  about  the  nineteenth 
century  was  its  great  progress  along  technical  lines,  result- 
ing in  the  rapid  adoption  of  new  processes  and  methods, 
and  the  fabrication  of  entirely  new  products.  It  will  be 
well  to  turn  to  this  phase  of  the  question,  and  try  to  get 
some  idea  of  the  extent  to  which  this  progress  in  discovery 
and  invention  came  to  the  aid  of  the  manufacturer  and  of 
the  world  in  general.  This  last  qualification  is  necessary, 
because  if  we  look  upon  industrial  development  as  a  mat- 
ter complete  in  itself,  and  of  interest  only  to  the  laborer  and 
the  employer,  we  are  missing  the  most  important  part  of 
our  story.  There  is  already  too  widespread  a  tendency 
to  think  of  events  only  in  terms  of  their  effects  on  the  for- 
tunes of  some  particular  labor  organization,  or  of  some 
particular  manufacturing  corporation.  It  is  time  to  think 
of  their  effects  on  the  nation  as  a  whole. 


CHAPTER  XVI 
THE  PROGRESS  OF  INVENTION  AND  DISCOVERY 

In  discussing  the  progress  of  invention  and  discovery 
during  the  period  of  modern  industrialism,  an  attempt  will 
be  made  to  get  away  from  a  purely  chronological  record  of 
mechanical  improvements,  and  to  arrive  at  a  somewhat 
broader  view  of  the  subject  we  have  in  hand.  It  is  easy 
enough  to  set  down  a  Hst  of  dates,  covering  the  invention 
or  adoption  of  important  processes  and  machines,  but  when 
we  have  done  this  we  have  not  really  gone  very  far  toward 
understanding  the  changes  that  have  come  about  during  the 
past  hundred  and  fifty  years,  or  toward  reaching  any  well- 
founded  ideas  as  to  the  possibilities  and  direction  of  future 
changes.  Yet  unless  we  can  do  this  last,  most  of  our  time 
will  have  been  wasted,  for  a  purely  historical  study  is  of  no 
possible  value  if  it  does  not  serve  to  throw  some  light  on 
the  conditions  of  the  present  and  the  probable  conditions  of 
the  future. 

Putting  the  problem  in  its  most  general  terms,  so  far  as 
purely  material  conditions  are  involved,  we  see  that  the 
world  of  1920  produces  a  far  larger  amount  of  commodities 
than  did  the  world  of  1770;  that  it  supports  a  far  larger 
population;  and  that  because  of  lowered  prices  the  com- 
modities produced  are  shared  far  more  evenly  among  the 
elements  of  the  population.  The  food  supplies  are  larger 
and  more  certain,  and  in  many  other  directions  man  has  been 
able  to  overcome  natural  obstacles  which  had  formerly 
served  to  limit  his  material  advancement.  Some  of  the 
factors  which  have  aided  to  bring  about  those  new  condi- 
tions may  now  be  considered  more  carefully.  The  first 
which  comes  to  attention,  of  course,  is  the  vast  increase  in 
power  which  is  now  at  our  service. 

201 


202  COAL,  IRON  AND  WAR 

Increased  mechanical  power.  The  entire  world  of  1770 
may  have  had,  so  far  as  we  can  calculate  now,  some  five 
hundred  millions  of  population,  or  roughly  one  third  as 
many  as  it  is  supposed  to  have  to-day.  The  power  available 
for  work,  has  however,  increased  in  a  far  greater  ratio,  and 
this  fact  has  affected  all  of  our  mechanical  activities.  In 
1770  the  total  power  available  was  that  of  human  beings 
and  draft  animals,  plus  a  few  small  water  powers,  plus  of 
course  the  fraction  of  wind  power  developed  by  windmills 
and  saihng  vessels.  If  we  assume  that  two-thirds  of  the 
world's  population  was  capable  of  useful  work,  and  if  we 
make  some  still  cruder  assumptions  as  to  the  animals,  mills 
and  vessels  then  in  existence,  we  come  to  some  such  figure 
as  eighty  millions  horsepower  as  being  the  absolute  maxi- 
mum possibly  available  at  that  date.  To-day  the  steam  and 
hydro-electric  power  utilized  in  the  world  must  aggregate 
around  one  hundred  and  sixty  million  horse  power,  so  that 
our  mechanical  power  alone  is  almost  double  the  total  world 
power  which  could  be  developed  in  1770. 

The  new  power  thus  placed  at  our  disposal  has  certain 
features  of  interest  aside  from  its  more  total  quantity.  It 
can,  for  example,  be  utilized  in  large  units,  so  that  many 
mechanical  achievements  are  now  easy  enough  which  a 
century  or  two  ago  would  have  been  impossible  because  of 
their  sheer  bulk.  Further,  the  new  powers  can  be  applied 
to  transportation  by  sea,  land  and  air,  in  ways  which  were 
entirely  impossible  when  man  and  animal  power  were  alone 
available.  The  net  results  are  that  we  can  produce  and 
transport  raw  materials  and  manufactured  products  in 
larger  quantities,  in  less  time  and  at  lower  cost;  so  that  the 
finished  product  can  reach  wider  markets  and  at  lower 
prices. 

Not  all  the  new  power  available  is  used  to  increase  quan- 
tities and  lower  costs,  however;  a  very  large  proportion  has 
been  used  in  reducing  the  amount  of  human  labor  employed 
in  physical  work.     During  the  century  and  a  half  of  our 


PROGRESS  OF  INVENTION  AND  DISCOVERY      203 

machine  civilization  these  effects  have  become  so  great  that 
a  very  large  percentage  of  the  population  has  been  entirely 
released  from  hard  physical  labor,  while  the  working  time 
of  the  remainder  has  been  reduced  from  twenty  to  forty 
per  cent.  Now  these  are  changes  which  must  be  credited 
directly  to  modern  industrialism,  and  they  have  been  made 
possible  only  by  increased  technical  efficiency  in  all  the  manu- 
facturing processes.  Further  reductions  in  human  labor 
per  ton  of  output  must  depend,  as  in  the  past,  on  further 
improvements  in  processes,  not  on  laws  or  social  pro- 
grams. 

As  regard  the  technical  advances  which  have  been  made 
during  this  period,  these  which  relate  to  the  development 
and  transformation  of  power  are  many  in  number  and  great 
in  importance,  but  for  our  present  purposes  we  may  simply 
note  a  few  of  the  main  lines  of  progress.  Taken  roughly 
In  order  of  development  these  were  the  steam  engine,  the 
water-power  turbine,  the  electric  dynamo,  the  gas-engine,  to 
which  perhaps  we  might  fairly  add  the  steam-turbine.  Of 
these,  the  steam-engine  had  the  entire  field  for  over  half 
a  century,  from  the  early  work  of  Watt  In  1769  to  the  be- 
ginnings of  work  on  water  turbines  and  dynamos  around 
1830.  It  had  indeed  a  longer  time  than  that  commercially, 
for  It  was  not  until  after  our  Civil  War  that  the  dynamo 
was  perfected  and  the  internal  combustion  engine  made 
effective.  So  we  may  give  the  steam  engine  an  uninter- 
rupted field  for  practically  a  century,  before  attention  was 
seriously  turned  toward  its  rivals. 

During  this  long  period  the  growth  of  steam  power  was 
steady  and  very  great.  We  can  fairly  assume  that  it  started 
from  zero  in  1770,  for  the  old  Newcomen  engines  then  In 
use  were  not  serious  In  number  nor  in  total  power.  Within 
a  hundred  years  there  were  eighteen  million  horse  power  de- 
veloped by  steam  engines  In  Europe  and  America,  and  by 
the  close  of  the  nineteenth  century  this  total  had  risen  to 
over  seventy  million  horse  power. 


204  COAL,  IRON  AND  WAR 

The  different  uses  to  which  this  new  power  was  put  show 
some  very  interesting  changes  in  relative  importance.  At 
first  the  great  demand  was  for  manufacturing  power  and 
all  of  the  early  power  was  turned  in  that  direction.  But 
gradually  steamships  came  into  use,  and  then  locomotives. 
Mulhall  estimates  that  of  the  1650  thousand  H.P.  avail- 
able by  1840,  half  was  used  as  stationary  or  manufactur- 
ing power,  almost  a  third  by  railways,  and  the  remainder 
by  steamers.  By  1870,  however,  the  railroads  were  taking 
two-thirds  of  the  total  power,  and  manufactures  only  a 
quarter.  Our  own  estimates  covering  current  conditions, 
as  given  in  Chapter  IX  are  perhaps  a  better  guide,  since 
being  based  on  coal  consumption  they  automatically  make 
proper  allowance  for  the  fact  that  mill  engines  are  in  more 
constant  service  than  locomotive  and  marine  engines.  We 
saw  there  that  at  present  about  one  quarter  of  our  steam 
power  is  used  on  transportation,  and  over  half  in  the  manu- 
facture of  commodities. 

What  we  rarely  realize,  in  considering  the  early  steam 
engines  and  steam  machinery,  is  the  excessive  badness  of 
the  shopwork  which  was  then  customary.  In  those  days, 
and  indeed  even  until  the  decade  of  1 830-1 840  when  Whit- 
worth  worked  out  his  great  advances  in  machine  tools,  there 
was  no  way  of  making  a  really  plane  surface  except  by  con- 
tinuous trial  and  error.  The  shop  had  no  planing  machines 
of  any  sort;  it  did  have  very  crude  lathes,  and  equally  crude 
drills;  other  than  these,  hand  tools  and  a  rule  divided  into 
eighth-inches  were  the  only  appliances  available.  Under 
these  circumstances  we  need  no  longer  wonder  at  the  rough- 
ness of  the  early  engines  and  power  machinery;  the  only 
wonder  is  that  it  ever  could  be  induced  to  operate  at  all. 
We  find  Watt,  for  example,  congratulating  a  client  on  get- 
ting an  18  inch  cylinder  which  was  bored  so  accurately  that 
it  was  not  over  three-eighths  of  an  inch  out  of  true.  And 
this  was  really  wonderfully  good  shop  practice  for  1800, 
and  not  very  bad  practice  for  1825.     In  the  early  days  it 


PROGRESS  OF  INVENTION  AND  DISCOVERY      205 

might  take  several  months  to  coax  a  steam  engine  to  run, 
after  it  was  finally  erected;  it  might,  indeed,  refuse  to  run 
at  all,  no  matter  how  many  old  hats  or  papers  were  used 
to  stuff  the  leaky  places  in  the  cyFmders. 

Next  in  importance  to  steam  comes  the  question  of  elec- 
tric power.  This  is,  in  its  real  commercial  applications,  a 
matter  of  barely  more  than  the  last  half  century,  for  until 
the  dynamo  was  perfected  there  was  no  adequate  source 
of  cheap  electric  power,  and  electricity  could  be  utilized  only 
in  some  of  its  minor  industrial  possiiblities  such  as  the  tele- 
grr-ph  and  electro-plating.  With  the  coming  of  the  dynamo, 
however,  it  was  possible  to  develop  electric  power  in  any 
quantity  required,  from  initial  steam  or  water  power. 

We  sometimes  overlook  the  fact  that  the  very  rapid  de- 
velopment of  electric  power,  in  the  decades  after  our  Civil 
War,  was  due  to  certain  advantages  which  had  not  been 
existent  when  steam  power  was  being  slowly  developed. 
The  more  obvious  of  these  factors  which  aided  the  later 
industry  were  the  facts  that  all  our  metals  were  vastly  im- 
proved and  greatly  cheaper,  and  that  our  shopwork  was 
immensely  superior  to  that  possible  during  the  early  days 
of  the  century.  In  discussing  steam  power  some  reference 
has  been  made  to  this  later  point,  and  it  can  be  seen  im- 
mediately that  electric  development  might  have  been  very 
slow  if  it  had  been  compelled  to  struggle  with  meters  and 
dynamos  made  as  crudely  as  were  the  early  steam-engine 
parts.  But  there  was  a  further  advantage  to  the  later  de- 
veloped industry,  and  this  arose  from  the  great  advances 
that  had  been  made  in  pure  science,  notably  in  chemistry 
and  physics.  It  was  no  longer  necessary  for  the  machine 
maker  to  proceed  by  guess;  he  had  very  definite  rules  at 
his  disposal,  worked  out  by  the  scientist  from  laboratory 
experiment.  So  we  find  that,  in  fact,  many  of  the  great 
electrical  inventions  were  made,  not  by  men  in  the  industry, 
but  by  scientists  in  universities  and  elsewhere. 

Aside  from  its  uses  in  power  and  lighting,  which  are 


2o6  COAL,  IRON  AND  WAR 

most  obvious,  an  increasingly  important  utilization  of  elec- 
tricity is  in  the  chemical  and  metallurgical  industries,  and 
this  use  is  likely  to  become  still  more  striking  in  the  future. 
At  present  we  need  only  note  that  our  aluminum  produc- 
tion, our  atmospheric  nitrogen  and  calcium  carbide,  much  of 
our  alkali  and  much  of  our  metal-refining  are  dependent 
upon  the  large-scale  production  of  electricity. 

We  need  only  note,  without  discussion,  the  other  import- 
ant power  developments  of  the  past  century  —  the  water 
turbine,  which  makes  hydro-electric  power  possible ;  the  gas 
or  internal  combustion  engine,  our  most  economical  way 
of  using  fuel  to  produce  power;  and  the  steam-turbine,  most 
effective  mode  of  employing  the  power  of  steam.  All  of 
these  will  be  of  increasing  future  importance,  but  none 
could  have  the  completely  revolutionary  effect  that  came 
with  the  first  crude  but  practicable  steam  engine. 

Transport  and  communication.  Passing  from  questions 
of  the  development  or  transmission  of  power  to  that  of  its 
utilization,  first  place  may  be  given  for  many  reasons  to 
the  matter  of  improvements  in  transportation. 

The  world  of  1750  was  more  limited  in  this  regard  than 
we  are  apt  to  realize,  and  it  would  be  difficult  for  an  ex- 
ploring expedition  to-day  to  find  a  place  as  badly  off  for 
transportation  as  were  France  and  England  then.  Despite 
popular  romances  as  to  the  duration  of  the  old  Roman  roads, 
they  did  not  as  a  matter  of  fact  exist  in  seventeenth  or  eigh- 
teenth century  Europe.  There  were  sailing  vessels  on  the 
seas  and  along  the  coasts;  there  were  practically  no  canals 
or  good  roads;  the  inland  transport  was  effected  by  pack 
animals  or  carts;  and  the  horses  used  were  of  a  grade  which 
could  not  be  sold  for  beef  to-day. 

What  this  meant  in  the  way  of  transporting  food  or 
pther  commodities  is  hard  to  comprehend.  We  may  as- 
sume, I  think,  that  in  Europe  of  1750  the  average  cost  of 
transporting  a  ton  of  anything  to  market,  roads  and  cattle 
considered,  must  have  been  well  over  fifty  cents  a  mile  in 


PROGRESS  OF  INVENTION  AND  DISCOVERY      207 

our  present  currency.  The  meaning  of  this,  as  regards  food 
supplies  and  famines  we  will  consider  later.  Here  we  need 
only  think  of  Its  effects  on  the  production  of  other  commo- 
dities, and  see  how  these  limiting  conditions  were  grad- 
ually improved  under  the  new  industrial  regime. 

If  I  am  right  In  my  cost  estimates,  it  is  clear  that  a  manu- 
facturer ten  miles  away  from  his  main  market  In  1750 
would  have  been  as  badly  located  as  if  he  were  five  hun- 
dred to  a  thousand  miles  away  from  it  to-day.  Under 
such  conditions  there  was  obviously  no  inducement  for  a 
great  industry  to  build  up  around  a  supply  of  raw  materials, 
unless  that  supply  happened  to  lie  very  near  a  good  market. 
There  was  In  fact  no  inducement  to  build  up  great  units 
anywhere.  The  natural  course  for  industry  to  follow  then 
was  to  have  a  large  number  of  small  units,  each  located  near 
to  a  good  market.  The  only  exceptions  to  this  rule  would 
come  from  small  groupings  around  a  water  power,  In  the 
rare  instances  where  power  would  be  cheap  enough  to  com- 
pensate for  distance  to  market ;  or  the  more  important  con- 
centrations along  the  lower  reaches  of  a  navigable  river, 
where  the  question  of  transportation  to  market  became 
simpler.  Other  than  these  —  very  small  groups  of 
workers,  or  better  yet,  household  manufacture. 

The  first  improvements  in  transportation  came,  Indeed, 
before  the  new  industrialism  had  found  its  new  source  of 
power;  and  they  took  the  lines  of  real  roads  and  of  canals, 
both  in  England  and  in  France.  During  the  decades  1750 
to  1780  there  were  vast  improvements  made  In  both  direc- 
tions and  In  both  countries.  There  is  a  history  of  grimly 
humorous  type  relative  to  one  of  these  early  English  canals. 
When  Its  construction  was  undertaken  the  laborers  of  the  re- 
gion gathered,  with  petitions  and  riots.  Their  protest  was 
not  against  the  canal  itself,  nor  against  the  introduction  of 
machinery,  for  as  yet  there  was  no  machinery  to  introduce. 
The  ground  of  the  protest  throws  some  much  needed  light 
on  the  condition  of  labor  at  the  time,  and  may  be  com- 


2o8  COAL,  IRON  AND  WAR 

mended  to  the  attention  of  those  who  believe  that  the  later 
introduction  of  modern  industrialism  wrecked  a  previously 
free  and  happy  laboring  class.  It  was  simply  this;  the 
laborers  had  heard  that  when  the  canal  was  completed 
horses  were  to  be  used  instead  of  men  to  pull  the  boats;  and 
they  protested  because  this  would  cut  down  their  chances  of 
work. 

After  the  steam  engine  had  once  been  put  into  practical 
shape  by  Watts,  attempts  to  utilize  it  for  water  transport 
were  almost  immediate.  Even  before  any  mill  was  run 
by  steam  the  problem  of  steamboat  operation  was  well  on 
its  way  to  solution,  as  is  shown  by  the  earher  American  and 
English  projects  around  1785.  But  it  took  thirty  years 
to  produce  a  commercial  success  in  this  line,  and  Fulton's 
Clermont  was  the  first  vessel  to  make  a  real  voyage  under 
steam.  In  the  next  fifteen  years  the  Channel,  the  Missis- 
sippi and  the  Atlantic  all  had  steam  navigation.  Com- 
modities could  now  be  handled  cheaply  enough  by  water, 
provided  that  there  were  only  some  means  for  getting  them 
to  the  ports. 

The  new  problem  was  therefore  one  of  land  transport, 
and  at  first  took  a  form  to  which  it  did  not  return  for  over 
a  hundred  years.  This  was  motor  truck  transport,  by 
steam  on  ordinary  roads.  The  next  stage  attempted  was 
the  laying  of  rails  on  roads.  Neither  of  these  primitive 
efforts  got  very  far,  as  can  be  readily  understood  now,  in 
view  of  the  difficulties  found  later  even  when  we  had  a 
lighter  motive  power.  So,  at  a  considerably  later  date, 
came  a  new  series  of  attempts  at  land  transportation.  Involv- 
ing two  new  features.  These  were  the  use  of  a  specially 
prepared  roadway  or  track,  and  the  use  of  a  separate  motor 
power,  or  locomotive.  Stephenson's  name  is  indissolubly 
connected  with  the  success  in  both  directions,  and  with  the 
final  opening  of  commercial  railroad  transportation  in  1825. 
During  the  sixty  years  which  followed,  one  of  the  principal 
features  of  periods  of  industrial  activity  was  the  rapid  ex- 


PROGRESS  OF  INVENTION  AND  DISCOVERY      209 

tension  of  railroads  all  over  the  globe.  The  maximum  of 
this  activity  seems  to  have  passed;  whatever  we  may  do  in 
future  years  can  never  represent  the  same  percentage  of  ad- 
vance as  has  been  seen  during  various  periods  in  the  past. 
Our  future  progress  will  take  other  lines. 

By  i860  the  great  producing  regions  and  markets  of  the 
world  were  pretty  well  connected  by  roads,  canals,  rail- 
roads and  steamships;  and  the  cost  of  transporting  foods 
and  commodities  had  fallen  to  perhaps,  on  the  average, 
two  cents  a  ton-mile  by  rail  and  a  half-cent  per  ton-mile  by 
steamer.  This  was  indeed  a  very  far  cry  from  the  fifty 
cents  per  ton-mile  of  a  century  previous.  The  effect  of 
lower  freights  was  not  only  to  reduce  the  cost  of  commo- 
dities in  distant  markets,  but  to  make  possible  the  return 
carriage  of  food  supplies  to  manufacturing  countries  and 
centers.  For  as  manufactures  increased,  there  was  a  rela- 
tive decrease  in  farm  labor,  near  the  points  at  which  indus- 
try was  concentrated,  and  industrial  progress  would  have 
been  brought  to  an  end  by  lack  of  local  food  supplies  if 
more  extensive  transport  of  food  had  not  become  possible. 

In  later  decades  came  still  greater  expansion  of  the  rail- 
way web  across  the  continent,  along  with  added  facilities 
for  marine  transport  through  the  execution  of  several  great 
canals.  And,  along  with  improvements  in  transport  came 
improvements  of  almost  equal  importance  in  communica- 
tion, of  which  the  electric  telegraph  and  the  cable  were  the 
earliest  and  greatest  in  effect.  Of  the  more  recent  im- 
provements in  both  transport  and  communication  —  the  sub- 
marine and  airplane,  the  gas  engine  and  steam  turbine,  the 
wireless  —  there  is  little  need  to  do  more  than  note  their  oc- 
currence. Here  also,  as  in  the  case  of  power,  the  greatest 
achievements  in  the  way  of  reducing  costs  were  made  in 
the  earlier  decades  of  the  new  industrialism,  and  our  later 
inventions  have  rather  been  along  the  line  of  overcoming 
special  difficulties,  as  for  example  aerial  navigation,  than 
along  the  line  of  greater  economy  In  transport.     Whatever 


2IO  COAL,  IRON  AND  WAR 

may  be  the  future  of  air  and  under-water  transport,  it  can 
never,  because  of  purely  physical  conditions,  be  carried  out 
as  economically  as  transport  on  water  or  on  land.  For  any 
further  lessening  of  commodity  prices  or  food  costs  we 
must  still  look  to  improvements,  relatively  slight  perhaps, 
along  the  older  lines. 

Food  supplies  and  housing.  In  the  days  before  the  new 
industrialism,  food  supplies  were  local,  they  were  usually 
scanty,  and  they  were  often  very  uncertain  —  all  of  which 
facts  are  closely  connected.  If  a  country  or  region  grows 
all  its  own  food  supplies,  it  is  practically  dependent  on  local 
crop  conditions.  Lacking  cold  storage,  it  is  limited,  for 
much  of  its  food  supply,  to  the  product  of  a  single  year. 
This  means  that  one  year  of  local  crop  failure  causes  dan- 
gerous shortage,  and  that  a  succession  of  such  years  means 
widespread  famine.  This  was  the  experience  of  many 
parts  of  Europe  during  many  centuries,  and  it  is  one  of 
the  natural  dangers  from  which  we  have  been  delivered  by 
modern  industrialism.  Improvements  in  transport  have 
opened  up  now  and  cheaper  sources  of  food  supply;  im- 
provements in  farming  implements  and  fertilizers  have  re- 
duced the  cost  and  increased  the  output  per  acre;  and  both 
together  have  very  greatly  decreased  the  danger  of  serious 
scarcity  at  any  place. 

Of  these  factors  improved  transportation  came  to  the 
aid  of  humanity  most  promptly,  for  as  soon  as  steam  naviga- 
tion was  adopted  the  possibility  of  carrying  American  wheat 
to  Europe  quickly  did  away  with  much  of  the  danger  of 
local  shortages,  and  later  the  Argentine  and  Australia  were 
enabled  to  become  food  suppliers  on  a  large  scale,  thanks  to 
the  extension  of  cheap  rail  and  water  transport.  We  are 
just  emerging  from  the  most  serious  test  to  which  modern 
methods  of  food  supply  have  ever  been  subjected,  and  on 
the  whole  they  have  functioned  very  well  indeed.  At  a 
time  when  half  the  white  men  of  Europe  were  engaged  in  a 
long  war,  there  has  been  scarcity  of  food  but  not  famine. 


PROGRESS  OF  INVENTION  AND  DISCOVERY      211 

In  later  years  came  improved  farming  machinery,  and 
at  about  the  same  time  the  commencement  of  scientific  use 
of  fertilizers.  Later  still  we  had  the  beginnings  of  cold 
storage,  and  of  the  transportation  of  meat  and  other  foods 
in  artificially  refrigerated  cars  and  ships.  Still  later  there 
was  the  commencement  of  a  still  growing  industry  —  the 
tinned  provision  trade. 

Next  In  importance  to  the  question  of  food  supply  comes 
that  of  housing,  and  here  the  new  IndustriaHsm  has  met  with 
new  requirements  and  has  offered  new  solutions,  both  as 
regards  buildings  for  habitation  and  buildings  for  work. 
The  modern  world  has  to  deal  with  vastly  Increased  popu- 
lations, which  are  largely  concentrated  In  and  near  great 
working  and  business  centers.  Both  for  housing  these 
populations,  and  for  providing  working  space  in  factories, 
mills,  shops  and  ofl^ces  the  requirements  are  not  only  larger 
but  more  dIfiScult  than  they  were  for  the  smaller  communi- 
ties of  earlier  periods. 

In  older  days  the  buildings,  of  whatever  nature,  were 
built  of  timber,  stone  or  brick;  and  there  was  an  ample  sup- 
ply of  all  three  of  these  materials  for  the  small  amount  of 
building  construction  carried  on.  Further,  there  was  prac- 
tically no  need  to  build  anything  to  carry  weight,  for  in  the 
rare  instances  where  heavy  supplies  were  stored  or  heavy 
implements  used,  there  was  ample  ground  space  to  put  all 
such  matters  on  a  solid  ground .  floor.  Finally,  since  the 
poulatlon  did  not  do  much  work  indoors,  the  lighting  re- 
quirements were  very  simple. 

For  a  modern  community  all  of  these  things  are  changed, 
and  new  materials  and  methods  have  had  to  be  applied  to 
the  problem.  Wood  is  being  largely  set  aside,  except  for 
ornamental  purposes,  because  it  Is  becoming  Increasingly 
scarce,  it  is  not  strong  enough  or  durable  enough,  and  it 
is  Inflammable.  On  the  other  hand  cement  and  steel,  either 
used  separately  or  combined  as  reinforced  concrete,  fill  all 
the  requirements,  and  enable  buildings  to  be  constructed  at 


212  COAL,  IRON  AND  WAR 

low  cost,  strong,  high,  well-lighted,  and  fireproof.  Both 
of  the  materials  we  now  employ  are  products  of  the  new 
industriahsm.  Portland  cement  has  been  used  for  build- 
ing construction  since  its  invention  in  1824,  and  iron  and 
steel  have  been  used  structurally  for  many  decades,  though 
the  so-called  skyscraper  type  of  steel  building  does  not 
go  back  beyond  the  decade  1 880-1 890. 

Clothing  and  textiles.  Next  in  importance  to  the  ques- 
tion of  food  supply  and  housing  comes  that  of  clothing, 
though  perhaps  for  certain  elements  of  our  population  these 
relative  ranks  should  be  reversed.  From  our  present 
standpoint,  however,  the  order  here  accepted  is  logical 
enough,  for  the  average  European  and  American  in  1770 
was  better  clothed  than  he  was  fed  or  housed,  by  com- 
parison with  our  modern  standards.  The  gains  made  dur- 
ing the  past  century  or  so  in  this  line  have  been  along  the 
lines  of  heavy  increases  in  the  world's  output  of  textiles, 
with  accompanying  great  decreases  in  cost  of  the  fabrics. 
Both  of  these  gains  are  due  entirely  to  the  adoption  of 
machinery  for  textile  manufacture,  and  were  made  in  op- 
position to  a  natural  tendency  toward  increased  prices  for 
the  raw  materials  from  which  the  fabrics  are  made.  That 
this  tendency  toward  increased  prices  of  raw  cotton,  silk, 
wool  and  flax  has  not  resulted  in  very  sharp  price  increases 
for  these  raw  materials  has  been  due  to  the  increased  area 
rendered  available  for  their  production  through  the  new 
methods  of  transport. 

The  cotton  plant,  for  example,  was  introduced  into  the 
United  States  from  India  late  in  the  eighteenth  century, 
and  soon  became  an  important  staple  in  its  adopted  coun- 
try. The  blockade  during  our  Civil  War  aided  materially 
in  giving  cotton  raising  a  foothold  in  Egypt,  while  during 
the  past  decade  it  had  been  established  in  the  Congo  and 
In  Brazil.  The  same  thing  has  taken  place  with  regard  to 
wool,  which  has  added  the  United  States,  Australia  and 


PROGRESS  OF  INVENTION  AND  DISCOVERY       213 

Argentina  successively  to  its  original  European  sources  of 
supply. 

The  chief  inventions  which  remodeled  the  methods  of 
manufacturing  textiles  were  grouped  in  the  forty  years 
following  1760,  so  that  by  1804  modern  types  of  machinery 
were  in  operation,  in  England,  France  and  Germany,  in  a 
number  of  plants.  Steam  power  had  been  introduced  for 
cotton  mill  operation  as  early  as  1785,  and  spread  quite 
rapidly  in  the  English  textile  centers.  From  the  beginning 
of  the  nineteenth  century  onward  the  progress  was  steady 
and  rapid  in  all  the  industrial  countries. 

Some  rough  idea  of  the  amount  of  the  changes  thus 
brought  about  in  clothing  materials  may  be  gained  by  noting 
that  the  world's  production  of  cotton  has  increased  about 
twenty  times  in  the  past  century,  from  around  one  mil- 
lion bales  in  18 10  to  around  twenty  milHon  bales  in  the 
years  immediately  preceding  the  World  War.  This 
increase,  though  far  less  than  that  shown  by  iron  and 
coal  during  the  same  period,  is  still  very  large  as  com- 
pared with  the  increase  in  population.  We  might  figure 
that  in  1800  the  cotton  output  amounted  to  less  than  one 
pound  yearly  per  capita  of  the  world's  inhabitants,  while 
a  century  or  so  later  it  had  risen  to  some  six  pounds  per 
capita. 

Prior  to  1800,  and  indeed  down  to  the  middle  of  the 
nineteenth  century,  wool  and  cotton  were  approximately 
equal  in  supply,  but  from  that  time  on  cotton  output  in- 
creased heavily  while  wool  showed  little  advance,  so  that 
now  the  total  wool  clip  of  the  world  amounts  to  only 
about  one-fifth  the  weight  of  the  cotton  crop.  As  regards 
population,  this  implies  that  the  average  inhabitant  of  the 
world,  supplied  with  about  one  pound  per  year  of  wool  in 
1800,  has  now  about  one  pound  and  a  quarter.  In  other 
words  the  world's  wool  production  has  not  much  more 
than  kept  pace  with  the   growth  of  population,   and  in 


214  COAL,  IRON  AND  WAR 

future  is  likely  to  fall  behind  rather  than  improve.  That  is 
of  course  the  case  with  animal  foodstuffs  also,  for  though 
modern  methods  can  keep  down  the  price  of  animal  pro- 
ducts, they  have  no  appreciable  effect  on  Increasing  their 
total  supply.  We  encounter  much  the  same  difficulty  in 
regard  to  vegetable  products,  though  not  to  the  same  ex- 
tent, for  here  improved  methods  of  cultivation  do  have 
some  effect,  though  less  than  generally  thought,  on  the 
average  yield  per  acre. 

Iron  and  the  metal  industries.  In  passing  from  foods 
and  fiber  supplies  to  iron  and  steel  we  have  passed  from  a 
field  which  is  not  entirely  under  mechanical  control  into 
one  in  which  our  output  is,  as  yet,  limited  only  by  the  de- 
mand for  the  product,  and  not  by  natural  difficulties  in 
the  way  of  securing  heavily  increased  supplies  of  raw  ma- 
terials. 

This  facility  in  enlargement  of  production  is  shown 
strikingly  when  we  consider  the  growth  which  the  iron 
industry  has  shown  since  modern  industrialism  commenced. 
We  may  perhaps  estimate  the  iron  output  of  the  entire 
world,  in  1750,  at  certainly  not  over  two  hundred  thousand 
tons,  and  probably  far  less.  By  1800  this  had  increased  to 
some  eight  hundred  thousand,  and  by  1850  to  almost  five 
million  tons.  The  end  of  the  nineteenth  century  saw  an 
annual  iron  output  of  over  forty  million  tons,  which  was 
increased  to  almost  eighty  million  tons  in  the  year  before 
the  war. 

This  implies  that  the  average  Inhabitant  of  the  world  was 
supplied  with  about  two  pounds  of  iron  per  year  in  1800,  as 
against  an  average  now  of  almost  one  hundred  pounds. 
The  iron  output  Increased  fifty  times  In  that  period,  during 
which  as  we  have  noted  the  cotton  output  Increased  twenty 
times,  and  the  wool  output  five  times.  These  comparative 
figures  serve  to  give  some  Idea  of  the  relative  facility  of 
meeting  increased  demands  for  mineral,  vegetable  and 
animal  products,  and  of  the  relative  advances  which  the 


PROGRESS  OF  INVENTION  AND  DISCOVERY      215 

world  has  been  able  to  make  along  these  three  lines  during 
a  century  of  mechanical  progress. 

There  is  one  matter,  however,  which  must  be  brought  to 
attention,  in  order  that  we  may  have  a  proper  background 
against  which  to  see  and  understand  the  very  wonderful 
changes  which  were  brought  about.  The  point  to  be  noted 
relates  to  the  price,  actual  and  relative,  of  iron  at  various 
times.  We  are  accustomed  to  thinking  of  iron  as  being  by 
far  the  cheapest  of  the  metals,  so  cheap  that  no  limitation 
on  its  reasonable  use  can  be  set  by  questions  of  price.  Both 
these  things  are  true  to-day,  but  they  are  not  always  true; 
and  it  is  due  entirely  to  relatively  modern  industrial  develop- 
ment that  this  change  has  come  about.  In  the  happy  days 
of  our  forefathers  iron  was  not  the  cheapest  metal,  and  it 
was  entirely  too  dear  to  use  for  ordinary  purposes.  The 
fact  that  we  can  now  use  it  freely  for  ships  and  rails  and 
buildings  is  generally  accepted  as  implying  that  this  was 
always  the  case.  Nothing  could  be  farther  from  the  truth; 
for  until  the  world  turned  its  attention  to  quantity  produc- 
tion by  means  of  the  despised  "  factory  system  "  iron  was 
a  good  deal  of  a  luxury. 

Actual  price  comparisons  at  various  dates  will  serve  to 
show  that  these  statements,  though  probably  novel  to  most, 
are  not  unfounded.  Thanks  to  the  researches  of  Thorold 
Rogers,  it  is  possible  to  make  comparisons  for  several  of 
the  earlier  periods,  and  there  are  of  course  ample  records 
for  conditions  after  1750.  Fortunately  we  have  available 
data  as  to  another  metal  —  lead  —  convenient  for  study 
of  relative  prices,  for  lead  has  always  had  wide-spread  in- 
dustrial uses  and  for  a  long  time  its  sources  of  ore  supply 
and  methods  of  metallurgy  were  practically  unchanged. 
Prices  have  in  all  cases  been  converted  to  current  price 
equivalents  and  expressed  in  dollars  per  ton. 

About  the  year  1350,  just  prior  to  one  great  renewal  of 
commercial  and  scientific  activity,  iron  sold  in  England  at 
what  would  now  be  equivalent  to  about  $2500  per  ton,     In 


2i6  COAL,  IRON  AND  WAR 

the  latter  part  of  the  seventeenth  century,  after  considerable 
industrial  improvement  had  occurred,  wrought  iron  still 
sold  at  a  price  comparable  to  $360  per  ton,  while  lead  was 
worth  just  about  half  as  much,  $160  per  ton.  By  the 
middle  of  the  eighteenth  century,  before  the  new  industrial- 
ism had  shown  its  effects,  the  two  metals  had  reached  sub- 
stantial equality,  at  about  $80  per  ton.  Before  18 10,  $25 
per  ton  for  pig  iron  and  $45  to  $60  for  either  wrought  iron 
or  finished  castings,  were  normal  prices  in  England  and 
America.  With  the  foregoing  we  may  profitably  compare 
such  prices  as  $10  per  ton  for  pig  iron,  $22  per  ton  for  bar 
iron,  and  $18.75  ^or  steel  rails,  made  at  Pittsburgh  in  the 
low  record  price  year  1897.  We  may  fairly  summarize  the 
matter  by  saying  that  in  our  last  period  of  very  low  prices, 
iron  sold  at  one  quarter  of  the  price  it  commanded  in  the 
depression  of  1740;  and  at  less  than  one  per  cent,  of  its 
fourteenth  century  price. 

The  fact  that  the  world's  iron  output  has  increased  so 
largely,  concurrently  with  a  large  decrease  in  the  price  of 
iron  per  ton,  is  only  to  be  explained  when  we  consider  the 
great  improvements  which  have  been  introduced  in  iron 
metallurgy  during  the  period  which  saw  this  growth  in  out- 
put and  reduction  in  cost.  The  leading  changes  are  tab- 
ulated on  a  later  page  (p.  313),  which  serves  to  give  an 
idea  of  the  technical  progress  made,  in  point  of  time,  as 
compared  to  the  developments  in  other  lines  of  industry. 

The  chemical  industries.  In  passing  to  the  chemical  in- 
dustries, we  face  the  chief  industrial  problems  of  the 
future,  for  great  as  has  been  their  past  development  this 
group  seems  likely  to  show  still  more  striking  results  in  the 
years  to  come.  With  regard  to  coal  and  iron,  we  know 
now  about  what  we  may  expect  in  the  way  of  supplies,  and 
costs  and  uses;  with  regard  to  the  chemical  products,  we  are 
in  many  lines  only  commencing  to  study  them. 

So  far  as  the  heavy  chemicals  are  concerned  —  the  chief 
inorganic  acids,  alkalis  and  salts  —  their  history  and  de- 


PROGRESS  OF  INVENTION  AND  DISCOVERY       217 

velopment  run  almost  parallel  with  that  of  iron  and  steel, 
for  most  of  them  have  been  made  on  a  large  scale  for  well 
over  a  century.  New  supplies  of  raw  materials  have  been 
developed,  and  there  have  been  great  changes  in  methods 
of  manufacture,  along  with  large  increases  in  output,  for 
such  products  as  sulphuric  acid,  soda,  alums,  explosives  and 
fertilizers.  For  all  of  these  groups  sulphuric  acid  is  a  basic 
semi-finished  product,  and  a  very  fair  idea  of  the  progress 
of  the  heavy  chemical  industry  of  the  United  States  can  be 
gained  if  we  compare  the  figures  as  to  domestic  output  of 
sulphuric  acid  over  a  series  of  years.  This  is  done  in  the 
table  below. 

Year  Output,  short  tons    Per  cent,  increase  annually 

1870 50,000 

1880 154,000  12 

1890 693,000  18 

1899 1,353,000  9 

1904 1,642,000  4 

1909 2,401,000  8 

1914 3,162,000  6 

From  this  it  will  be  seen  that  the  American  industry, 
after  a  very  rapid  growth  in  the  early  decades,  has  now 
steadied  down  to  a  rate  of  increase  not  very  far  above 
that  shown  by  the  coal  and  iron  output  of  the  United  States. 

But  with  regard  to  the  organic  chemical  products,  par- 
ticularly these  derived  from  coal  and  petroleum,  the  case 
is  very  different,  and  it  seems  likely  that  here  we  are  to 
look  for  the  great  progress  of  the  future  decades.  In 
these  groups  we  have  whole  hosts  of  useful  products  en- 
tirely unknown  to  the  world  prior  to  the  last  century,  and 
many  of  them  not  produced  until  very  late  in  that  century. 
Such  products,  and  others  along  the  same  general  lines, 
may  display  surprising  increases  of  output  and  utilization 
in  future.  And  in  their  discovery  and  manufacture,  more 
than  in  any  other  line  of  industry,  we  have  learned  to 


2l8 


COAL,  IRON  AND  WAR 


Power 
Developments 


1769.    Watts  steam  engine 

1781.  Compound  steam  en- 
gine 

1785.  Engines  in  cotton  mill 
Steam  pumps  adopted 
in   coal    mines 

181S.    Miner's   safety   lamp 


1827.    Water  turbine 


1831.    Dynamo    invented 


1867.    Otto  gas-engine 


1761. 
1765. 


Transport  and 
Communication 

First  English  canal 
English  macadam 
roads 


Food  Supply 
AND  Housing 


1779.     First  iron  bridge 


1807. 
1816. 
1819. 


1825. 
1825. 

1829. 
1831. 

1836. 
1840. 
1845. 


1798. 
Steamboat  on  Hudson 

1815. 
Steamboat    crosses  1816. 

Channel 

Steamer  crosses  Atlan-      1817. 
tic 

1823. 
Railway  in  England  1826. 
Erie  canal  1826. 


1867.    Dynamo   perfected  1861. 

1866. 


1869. 
1873. 


1875. 
1876. 


Railway  in  U.  S. 
Iron   ships 

Screw   propeller 
Penny    postage 
Electric  telegraph 


Transcontinental    tele- 
graph 
Atlantic    cable 
Union  Pacific  railroad 
Suez  Canal  opened 
Duplex  telegraphy 

Air    brake 
Telephone 


1833. 
1837. 
1839. 
1840. 

1850. 
1858. 


1865. 
1867. 
1870. 

1876. 
1876. 


1883.  High  speed  oil  engine      188a 

1884.  Steam-turbine 


1896. 
1898. 

1900. 
1906. 
1915. 
1915. 


Trolley    car    commer-      1886. 
cialized 

1888. 


Gas  light  used  in  mill 

Gas  light  in  Paris 
Gas  light  in  Baltimore 

Gas  light  in  London 

Gas  light  in  New  York 
Reaping  machine 
Portland    cement    in- 
vented 

Mowing  machine 
Cotton  seed  oil 
Iron    buildings 
Liebig  fertilizers 

First  fertilizer  works 
Kerosene   lamp 


Steam  plow 

Artificial  ice 

Refrigerated    meats 
shipped 

Roller   mill   for  flour 

Electric  lighting 

Harvester 

Incandescent  gas  man- 
tle 

Chrome  tanning, 
leather 


1919. 


Motor   car 

Wireless  telegraphy 

Trans-Siberian  rail- 
road 

Zeppelin  airship 

Air  plane 

Panama   Canal 

Submarine  crosses  At- 
lantic 

Air  plane  crosses  At- 
lantic 


1895.    Acetylene  gas 


PROGRESS  OF 
Textiles,  Etc. 


1764.    Spinning   jenny 


INVENTION  AND  DISCOVERY      219 

Steel  and  Chemical 

Machinery  Industries 

173S.    Coke  msed  as  furnace 
fuel 

1740.    Crucible  steel  invented      1740.    Sulphuric  acid  made 
1746.    Lead  chamber  used 

1760.    Improved  blast  appar- 
atus 

1767.     First   saw   mill 


1769. 

Spinning   frame 

1779. 

Spinning    mule 

1783. 

Rolling  mill  improved 

1784. 

Puddling  adopted 

1785. 

Power  loom 

1785. 

First  steam  cotton  mill 

1785. 

Bleaching  by  chlorine 

1792. 

Cotton  gin  invented 

1790. 

Steam   used   for   blast 

1792. 

Well-combing  machine 

1795. 

Hydraulic  press 

1801. 

Steam  power  loom 

1804. 

Jacquard  silk  loom 

1811. 

Furnace  gases  used  for 
heating 

1828. 

Ring-spinning  ma- 

1828. 

Hot  blast  used  in  fur- 

chine 

nace 

1830-1840.    Machine  tools 

1832. 

First   sewing  machine 

1838. 

Steam-hammer 

1846. 

Howe      sewing      ma- 

1846. 

Hydraulic  crane 

chine 

1847. 

Cast-steel  guns 

1856. 

Bessemer  steel  process 

1858. 

Shoe  machinery 

1861. 

Power  rock   drills 

1864. 

Open  hearth  steel 
process 

1868. 

Alloy  steel    (tungsten) 

1803.    Paper  making  ma- 
chine 


1839.  Vulcanizing  rubber 

1846.  Gun-cotton  discovered 

1854.  Wood  pulp  paper 

1858.  Coal  tar  dyes 

1865.  Nitroglycerine 

1866.  Dynamite 

1869.  Celluloid 

1875.  Contact     process     for 

sulphuric  acid 

1880.  Synthetic  indigo 


1889.    Mercerized    cotton 


1878.    Basic  bessemer  steel 

1885.  Cowles  aluminum  pat- 
ents 

1889.  Hall  aluminum  pat- 
ents 


1895.    Use  of   furnace  gases     1893.    Electrolytic  soda 
in  gas-engine 


220  COAL,  IRON  AND  WAR 

depend,  not  on  happy  accidents  or  empirical  rules,  but  upon 
scientific  research  and  careful  technical  control. 

The  comparative  progress  of  invention.  At  the  outset 
of  this  discussion  it  was  suggested  that  usual  long  lists  of 
dates  and  inventors  might  well  be  dispensed  with,  as  not 
throwing  much  light  on  the  subjects  in  which  we  were  most 
interested.  That  is  true  enough,  and  that  rule  has  been 
followed  religiously  so  far.  But  at  this  stage  of  the  discus- 
sion, having  outlined  the  progress  made  in  different  lines 
of  activity,  and  having  noted  the  broader  effects  of  the 
various  changes  in  process  or  in  material,  it  will  be  of  in- 
terest to  summarize  the  matter  in  somewhat  graphic  form. 
To  this  end  the  advances  made  in  various  lines  are  arranged 
chronologically  in  the  table  which  follows,  each  group  of 
activities  being  placed  in  a  different  column.  By  this  means 
we  get  a  fairly  complete  view  of  the  general  relations  borne 
by  matters  which  are  too  often  considered  as  entirely 
separate  phenomena. 

The  incitement  to  invention.  Too  much  stress  is  com- 
monly laid  upon  the  relation  of  race  or  nationality  to  rela- 
tive progress  in  discovery  and  invention.  At  times  this 
takes  very  crude  forms  of  expression,  and  in  its  manifesta- 
tions during  the  recent  war  there  were  some  very  remark- 
able examples  of  absurdity  along  this  line.  But  even  when 
individual  race  pride  is  not  so  blatant,  one  often  meets 
statements,  for  example,  that  English  and  American  inven- 
tive genius  lies  along  the  line  of  mechanical  improvements, 
while  German  and  French  genius  trends  toward  chemical 
and  purely  scientific  progress.  In  reality  there  is  a  fact 
concealed  under  even  this  mis-statement.  It  is  not  true 
that  any  remarkable  racial  genius  has  led  to  these  results, 
but  it  is  true  that  for  a  century  or  so  the  other  conditions 
of  these  countries  have  led  in  these  directions. 

The  factors  necessary  to  bring  about  invention  are  not 
single,  but  numerous;  they  have  little  relation  to  race  or 
nationality  per  se^  but  very  close  relation  to  the  industrial 


PROGRESS  OF  INVENTION  AND  DISCOVERY      221 

conditions  which  happen  to  obtain  in  a  given  nation  at  a 
given  time.  For  inventions  and  discoveries  do  not  arise 
sporadically,  but  are  to  a  very  large  degree  forced  or  in- 
cited by  the  environment.  We  may  justifiably  divide  tech- 
nical progress  into  two  types  of  advance,  not  very  closely 
related,  which  bring  about  two  different  kinds  of  invention 
and  tend  to  develop  two  different  types  of  inventor.  First, 
we  have  the  case  where  there  is  some  well-known  com- 
mercial necessity  for  an  improvement  in  an  existing  process 
or  machine  or  product.  This  is  apt  to  be  met  by  an  in- 
vention proceeding  from  someone  actively  engaged  in  that 
industry,  whether  as  employer  or  as  laborer;  but  it  also 
may  proceed  from  an  outsider  who  has  his  attention  called 
to  the  necessity.  The  invention  of  the  steam  engine  and 
the  cotton  gin  are  of  this  latter  type,  for  neither  Watts  nor 
Whitney  were  engaged  previously  in  those  industries. 
Second,  we  have  the  class  which  is  of  increasing  importance, 
where  an  invention  proceeds  from  a  scientific  advance  of 
some  sort,  and  in  this  case  the  inventor  is  apt  to  be  a 
scientist,  so  that  both  discovery  and  invention  come  from 
the  laboratory,  rather  than  from  the  mill. 

In  either  case  a  period  characterized  by  great  inventive 
progress  implies  that  there  is  wide  activity  locally  in  the 
industry;  that  the  conditions  to  be  met  are  pretty  generally 
known,  and  that  there  Is  a  high  average  level  of  technical 
knowledge  and  education  In  the  country  or  region.  It  is 
because  of  these  necessary  conditions  that  we  have  such 
phenomena  as  whole  decades  during  which  the  United  States 
will  turn  out  invention  after  Invention  along  electrical  lines; 
or  others  during  which  Germany  makes  improvement  after 
improvement  In  chemical  processes  and  products.  It  is  not 
that  an  American  is  a  born  electrician,  or  a  German  a  born 
chemist;  It  Is  merely  that  during  certain  periods  all  the 
industrial  tendencies  in  those  nations  centered  about  certain 
lines  of  Industry. 

The  relation  of  a  patent  system  to  invention  is  not  so 


222  COAL,  IRON  AND  WAR 

clear  as  Is  usually  thought.  For  example,  the  French  have 
an  atrociously  bad  patent  system,  while  the  German  was 
perhaps  the  best  anywhere.  But  It  would  be  difficult  to 
prove  that,  prior  to  1871,  German  scientific  discoveries  or 
German  mechanical  Inventions  were  equal  in  number  or 
importance  to  those  of  the  French.  The  two  nations  are 
compared  simply  because  they  are  adjacent,  have  had  about 
equal  populations,  and  had  for  a  long  time  about  equal 
economic  development. 

For  the  same  reasons  we  may  fairly  compare  Great 
Britain  and  the  United  States,  on  the  same  bases.  The 
first  cost  of  .a  British  patent  Is  very  high,  so  high  as  to  dis- 
tinctly limit  Issues;  it  offers  a  fair  guarantee  as  to  the  novelty 
of  the  Invention;  and  good  protection  afterward.  On  the 
other  hand  the  cost  of  an  American  patent  is  very  low  In- 
deed; It  gives  a  very  good  assurance  as  to  novelty;  and  a 
lower  degree  of  protection.  The  American  system  Is  an 
obvious  Incitement  to  application  for  patent,  and  It  has  had 
this  effect  so  far  as  mere  numbers  are  concerned.  But  even 
an  ultra-patriotic  American  might  hesitate  to  pronounce  as 
to  other  results.  To  limit  attention  to  the  most  important 
of  our  Industries,  what  have  we  done  that  ranks  in  its  effects 
on  iron  and  steel  manufacture  along  with  the  Inventions 
of  puddling,  the  hot  blast,  the  Bessemer  process,  the 
Thomas-Gilchrist  ? 

A  matter  which  has  a  direct  bearing  upon  two  different 
political  questions  —  the  advisability  of  monopoly  and  the 
possibility  of  socialism  —  is  the  extent  to  which  the  existence 
of  competitive  conditions  incites  Invention.  It  Is  often 
assumed  that  inventions  arrive  as  if  by  an  act  of  God,  and 
that  they  would  in  any  case  appear  at  certain  times  regard- 
less of  commercial  conditions.  Nothing  could  be  further 
from  the  truth  than  this  Idea,  for  as  a  matter  of  fact 
practically  every  new  method  or  process  Is  Invented  as  the 
direct  result  of  free  competition,  and  every  new  method 
that  Is  adopted  Is  so  adopted  because  competition  exists. 


PROGRESS  OF  INVENTION  AND  DISCOVERY      223 

In  the  absence  of  competition  there  would  be  no  incentive 
to  work  out  a  new  process,  and  every  incentive  not  to  apply 
it  if  it  happened  to  be  invented.  For  in  every  case  a  new 
process  means  writing  off  a  part  of  your  fixed  capital,  and 
scrapping  existing  plant.  If  you  have  no  competition  there 
is  no  reason  why  you  should  accept  this  certain  loss. 

Now,  under  monopoly  control  of  an  industry,  so  long 
as  we  still  have  individual  ownership  of  that  monopoly, 
there  is  still  some  reason  to  adopt  a  new  invention,  even 
in  the  absence  of  competition,  if  it  means  that  by  its  adoption 
the  loss  due  to  scrapping  the  old  plant  can  be  quickly  made 
up,  and  that  later  operation  will  show  an  increased  percent- 
age of  profit  on  all  the  capital  involved.  The  incentive 
to  make  such  economies  will  not  be  as  great  as  if  a  com- 
petitor were  in  the  field,  but  there  will  still  be  some  small 
incentive.  And  what  we  actually  see  is  that  in  industries 
which  have  arrived,  in  some  country,  close  to  the  monopoly 
stage,  there  is  still  some  advance  in  practice,  though  not 
as  much  as  when  competition  is  bitter. 

But  under  socialism,  even  the  slight  incentive  felt  by 
private  monopoly  is  done  away  with;  for  there  is  no  way 
in  which  the  loss  on  the  old  plant  can  be  made  up.  It 
surely  can  not  be  done  by  increased  profits,  at  the  expense 
of  your  fellow  socialists  engaged  in  other  trades.  So  far 
as  I  can  see,  the  existence  of  private  monopoly  is  a  severe 
blow  to  any  future  advances  in  industrial  methods,  but  the 
adoption  of  government  ownership  or  collectivism  would 
stop  such  advances  entirely. 

The  question  of  patent  monopoly,  however,  involves  cer- 
tain difficulties  in  its  bearings  upon  two  different  phases  of 
the  question  of  progress.  Giving  a  monopoly  to  an  in- 
ventor, by  means  of  a  patent,  seems  to  be  an  almost  neces- 
sary condition  to  technical  progress,  for  we  have  found  by 
long  experience  that  a  process  or  product  not  covered  by  a 
patent  is  not  taken  up  very  ranldlv  by  Industry.  On  the 
other  hand  it  is  almost  equally  disadvantageous  to  technical 


224  COAL,  IRON  AND  WAR 

progress  to  have  an  industry  monopolized  through  patent 
control,  for  there  is  too  little  incentive  to  carry  out  any 
further  advances,  once  effective  control  is  established 
through  ownership  of  basal  patents. 


CHAPTER  XVII 
THE  RISE  AND  FALL  OF  PRICES 

At  intervals,  during  preceding  chapters,  reference  has 
been  made  to  the  fact  that  prices  of  manufactured  com- 
modities, though  fluctuating  widely  from  year  to  year,  have 
on  the  whole  shown  great  decreases  from  levels  known 
prior  to  the  adoption  of  machine  industrialism.  Heretofore 
no  discussion  of  these  phenomena  has  been  attempted,  but 
now  we  can  pay  some  attention  to  the  facts  regarding  price 
changes  and  to  the  causes  which  seem  to  underly  them. 

There  are  two  features  regarding  prices  which  are  of 
industrial  interest.  First  of  all,  we  may  assume  for  the 
moment  that  no  changes  in  currency  or  credit  conditions 
occur,  so  that  the  general  price  level  remains  constant,  and 
on  that  assumption  go  on  to  consider  what  changes  have 
occurred  or  are  likely  to  occur  in  the  prices  of  individual 
commodities,  as  the  result  of  technical  or  other  changes. 
Second,  abandoning  the  individual  commodity,  we  may  con- 
sider to  what  extent  there  have  been  changes  in  the  general 
or  average  price  level. 

I.     Changes  in  Individual  Prices 

The  increase  in  demand.  It  is  needless  to  say  that  the 
price  of  a  commodity  at  any  given  time  is  a  rough  effort 
to  balance  the  existing  supply  and  the  effective  demand  for 
that  particular  commodity.  To  express  this  fact  in  a  form- 
ula is  simple  enough  and  frequently  done,  but  it  does  not 
add  to  our  information  in  any  way.  The  matter  of  real 
interest  is  to  determine  the  factors  which  influence  the  de- 
mand and  the  supply,  so  that  we  can  come  to  some  conclusion 
as  to  the  direction  in  which  prices  are  tending.     This  can 

225 


226  COAL,  IRON  AND  WAR 

be  done  for  broad  groups  of  commodities  in  a  fairly  exact 
way. 

We  saw  in  an  earlier  chapter  that  the  demand  for  com- 
modities increases  in  at  least  the  same  ratio  as  does  the 
population,  otherwise  there  would  be  retrogression  in  liv- 
ing standards  instead  of  progress.  For  foodstuffs,  cloth- 
ing and  housing  the  demand  would  not  increase  much  faster 
than  population,  if  it  were  not  for  the  fact  that  great  frac- 
tions of  the  earth^s  population  are  still  deficient  in  these 
three  things.  So  that  even  for  the  things  of  which  we  do 
not  use  more,  individually,  than  did  our  grandfathers  there 
is  a  demand  for  a  greatly  increased  annual  supply. 

Further  than  this,  the  spread  of  wealth  and  education 
have  raised  the  general  idea  as  to  what  constitutes  a  reason- 
able and  comfortable  standard  of  living,  so  that  there  is  an 
increased  demand  for  many  articles  of  personal  adornment 
or  use,  as  well  as  for  articles  which  add  to  the  comfort  of 
the  home  and  the  community.  None  of  us  would  be  satis- 
fied to  return  to  the  very  limited  life  of  1800,  and  all  this 
implies  again  a  large  increase  in  demand  per  capita  for  an- 
other great  group  of  commodities. 

Of  the  two  factors  which  have  so  far  been  mentioned, 
the  first  will  act  until  all  the  world  attains  a  reasonable 
amount  of  food,  clothing,  sanitation  and  housing.  This 
promises  many  years  of  increasing  demand  from  this  source, 
but  it  is  not  entirely  indefinite  in  its  completion.  There 
will  come  a  day,  within  the  present  century  in  all  likelihood, 
when  this  requirement  will  be  fulfilled,  after  which  the  de- 
mand will  fall  to  the  rate  at  which  population  increases. 
The  second  factor  —  higher  living  standard  —  is  less  easy 
to  value  correctly;  it  would  increase  without  end  perhaps  if 
wealth  kept  pace  with  it;  but  it  is  likely  to  fall  off  severely 
during  a  long  period  of  depression,  and  for  this  reason  the 
commodities  affected  by  it  are  not  so  stable  as  those  very 
necessary  things  which  are  affected  by  the  first  factor. 

But  aside  from  the  things  so  far  considered,  we  must 


THE  RISE  AND  FALL  OF  PRICES  227 

recognize  that  a  very  large  proportion  of  the  commodities 
we  make  are  intended,  not  for  direct  use  and  consumption, 
but  for  the  transport  of  other  commodities  or  as  implements 
in  making  other  commodities.  All  of  our  ships,  locomo- 
tives, cars,  machine  tools,  etc.,  fall  in  this  class.  It  is  the 
group  for  which  demand  has  been  most  insistent  during  the 
past  century,  but  it  is  also  the  group  which  will  first  indicate 
a  falling  off  in  the  rate  of  industrial  development,  for  these 
things  are  all  of  semi-permanent  character,  and  are  the 
things  with  which  the  world  can  most  easily  become  over- 
stocked,   temporarily   or  permanently. 

From  this  brief  outline  we  can  see  that  the  character 
of  a  commodity  has  a  good  deal  to  do  with  the  rate  at 
which  demand  for  it  has  increased  during  the  past  years. 
We  can  now  turn  to  the  question  of  supply,  and  see  how 
various  classes  of  commodities  are  situated  with  regard 
to  the  possibility  of  meeting  largely  increased  demand. 

The  possibility  of  increased  supply.  We  can  see,  on 
very  slight  examination,  that  different  kinds  of  commodities 
are  in  widely  different  positions  with  regard  to  the  possi- 
bility of  responding  to  a  great  increase  in  demand.  The 
supply  of  some  commodities  can  be  increased  very  quickly, 
and  of  others  only  after  long  preparation;  in  some  cases 
the  increase  In  supply  has  no  practical  limit,  in  others  it 
means  increased  cost,  in  still  others  little  increase  is  pos- 
sible at  any  cost. 

We  may  say,  though  there  are  individual  exceptions, 
that  certain  broad  groups  of  commodities  have  the  following 
properties  in  these  respects; 

Animal  products  —  meats,  hides,  fats,  etc. —  can  be  in- 
creased to  some  extent  as  demand  Increases,  but  only  very 
slowly,  and  to  a  very  limited  ultimate  extent. 

Vegetable  products  can  be  increased,  not  immediately  but 
more  rapidly  than  animal,  and  to  the  extent  that  is  limited 
by  the  land  that  can  be  taken  into  cultivation. 

Mineral  products,  so  far  as  they  are  already  being  mined. 


xa  COAL,  IRON  AND  WAR 

can  be  increased  quite  rapidly  in  response  to  increased  de- 
mand, op  to  the  point  that  actual  scarcity  of  the  mineral 
begins  to  show  itself.  But  when  that  point  is  once  reached, 
since  no  human  effort  can  increase  the  total  supply  of  coal, 
oil,  ore,  etc.,  a  mineral  product  will  show  no  response  even 
to  a  very  pressing  demand. 

Manufactured  products,  being  made  by  the  combined 
use  of  raw  materials,  labor  and  machinery,  offer  a  more 
complex  problem.  In  general  they  can  respond  very 
quickly  to  increased  demand,  since  normally  there  is  a  sur- 
plus of  power  and  mechanism.  Furthermore,  if  the  in- 
creased demand  is  steady  and  likely  to  be  continued  for 
some  time,  there  will  be  the  construction  of  new  mills  and 
factories  to  meet  it.  On  the  purely  mechanical  side  there 
is  no  apparent  limit  to  increased  production  of  manufactured 
commodities.  But  in  so  far  as  they  use  animal,  vegetable 
or  mineral  raw  materials,  manufactured  commodities  are 
subject  to  the  limitations  of  those  groups,  and  the  ultimate 
supply  is  limited  by  the  quantity  of  raw  material  that  can 
be  furnished. 

Effects  on  prices.  We  may  now  apply  the  conclusions 
as  to  the  demand  and  supply  conditions  existing  in  these 
great  groi]^  of  commodities  to  the  question  of  changes  in 
price  in  these  groups.  It  will  be  seen  that,  other  things 
being  equal,  animal  products  are  likely  to  rise  in  price  as 
the  world  grows  more  densely  populated,  especially  since 
raising  animals  is  a  relatively  dear  way  of  using  land  of  any 
sort.  The  only  things  which  tend  to  hold  down  the  prices 
of  animal  products  arc  great  improvements  in  transportation 
and  treatment.  During  the  past  century  the  world  has 
seen  several  important  changes  in  both  these  respects,  and 
it  seems  safe  to  say  that  if  it  were  not  for  the  steamships, 
the  railroad  and  artificial  refrigeration  the  prices  of  meat 
and  leathers  might  easily  be  several  times  as  high  as  they 
are  even  now. 

Vegetable  products,  both  foods  and  fibers,  are  more  sub- 


THE  RISE  AND  FALL  OF  PRICES  229 

ject  to  human  control,  and  with  the  help  of  traii^>oitatiQa 
improvements  are  less  affected  by  increased  demand,  up  to 
the  point  of  land  scarcity.  Their  prices  would  tend  to 
increase  as  poorer  or  more  distant  land  is  forced  into  cul- 
tivation, but  so  far  the  improvements  in  transportation  and 
in  farming  methods  have  aided  materially  to  counteract 
this  increase. 

The  case  as  regards  mineral  products  has  been  discussed 
in  detail  in  Part  II  of  this  volume,  and  here  we  need  only 
refer  to  it.  In  these  earlier  chapters  we  found  that  there 
seems  to  be  reason  for  the  belief  that  in  some  of  our  main 
products  —  coal,  iron  ore  and  copper  ores  —  we  are  likely 
to  enter  a  higher  range  of  prices,  as  compared  with  the 
general  price  level  of  other  commodities. 

With  regard  to  manufactured  products  it  will  be  seen 
that  no  entirely  general  statement  can  be  made.  In  the 
past,  increased  power  and  machinery,  and  improvements  in 
process  have  been  so  great  that  the  prices  of  practically  all 
manufactured  commodities  are  far  below  what  they  were  a 
century  ago.  Even  temporary  periods  of  high  general 
prices,  such  as  the  one  through  which  we  are  now  passing, 
do  not  suffice  to  carry  the  price  of  iron  and  steel  products 
up  to  the  level  of  1800,  or  even  of  1870,  while  each  de- 
pression in  average  commodity  prices  has  so  far  carried  iron 
and  steel  products  down  to  new  low  levels.  This  condition 
can  not  be  expected  to  persist,  however,  for  we  will  finally 
reach  a  point  at  which  growing  scarcity  of  coal  and  ore 
will  prevent  low  costs  for  the  finished  products,  and  will 
consequently  prevent  new  low  price  levels.  That  point, 
in  my  opinion,  was  reached  two  decades  ago,  and  it  does 
not  seem  possible  that  the  next  great  period  of  low  average 
prices  will  see  steel  products  selling  as  low  as  they  could  in 
1897  ^^^  1898.  Similar  changes  are  taking  place  in  such 
other  manufacturing  lines  as  are  closely  dqpendent  on  raw 
material  conditions. 


230  COAL,  IRON  AND  WAR 

II.  Changes  in  the  General  Price  Level 
The  general  course  of  prices.  Heretofore  we  have  been 
considering  the  course  taken  by  the  price  of  any  single  com- 
modity or  group  of  commodities,  under  varying  conditions 
as  to  demand  and  supply.  But  In  addition  to  such  individual 
variation  in  prices,  there  are  price  movements  far  more 
general  in  their  scope  and  effects  —  great  waves  of  rising 
or  falling  prices  which  affect  all  commodities  substantially 
alike.  The  existence  and  extent  of  such  more  general  price 
changes  can  only  be  determined  if,  Instead  of  paying  atten- 
tion to  the  prices  of  a  single  commodity,  we  examine  the 
prices  shown  by  a  large  number  of  commodities  during  a 
long  series  of  years. 

This  is  done  In  the  various  "  Index  numbers  "  or  *'  aver- 
age prices  "  which  have  been  devised,  on  varying  bases,  by 
different  authorities,  and  which  have  been  extended  in  some 
cases  to  cover  the  range  of  general  prices  for  a  century  or 
more.  Figure  7,  on  page  231,  shows  one  of  these  series  of 
price  records,  placed  In  graphic  form,  covering  the  period 
1800  to  1920.  The  figures  here  used  as  a  basis  from  1800 
to  19 10  are  those  of  Jevons  and  Sauerbeck,  as  recalculated 
by  Layton  so  as  to  give  a  continuous  series  for  the  years 
covered.  This  series  is  longer  than  any  available  American 
index,  and  it  gives  a  better  idea  of  world  price  conditions, 
being  free  from  the  possible  criticism  that  our  own  prices 
have  been  Influenced  by  tariff  legislation  or  fiscal  policies. 
In  this  connection  it  might  be  noted,  however,  that  com- 
parison of  British,  American  and  German  price  averages 
over  long  series  of  years  show  In  reality  far  less  differences 
than  might  reasonably  have  been  expected.  For  the  years 
19 II  to  19 19  Inclusive  I  have  joined  on  the  Dun  Index 
number,  lowered  slightly  so  as  to  correspond  to  the  other 
series,  for  the  sake  of  showing  our  present  price  position 
relative  to  the  levels  of  previous  periods.  It  will  be  seen 
later  that  some  light  Is  thrown  on  our  existing  world-wide 


THE  RISE  AND  FALL  OF  PRICES  231 


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Fig.  7.    Average  price  levels,  1800-1920 


232  COAL,  IRON  AND  WAR 

labor  unrest  by  this  comparison,  and  it  is  also  of  interest  as 
giving  some  idea  of  the  normal  progress  and  ending  of  a 
war  inflation. 

The  diagram  on  page  231  brings  out  the  price  situation 
very  sharply  indeed.  Looked  at  in  its  broadest  form,  it  is 
that  during  the  Napoleonic  wars  commodity  prices  rose  to  a 
level  from  which  they  fell,  sharply  at  first  and  more  slowly 
thereafter,  for  thirty-five  years.  Then,  around  1850,  there 
was  a  secondary  rise  in  average  prices,  which  did  not  last 
long,  and  which  did  not  begin  to  approach  the  high  levels 
around  1800  to  18 10.  This  secondary  rise,  due  in  part  at 
least  to  the  California  and  Australian  gold  discoveries  was 
in  turn  succeeded  by  a  new  fall  in  prices,  carrying  averages 
to  low  levels  never  before  known,  and  culminating  around 
1896  to  1898.  From  this  again  there  was  a  trifling  price 
rise,  which  gave  every  sign  of  being  near  its  end  when  the 
World  War  suddenly  gave  it  new  life.  The  history  since 
19 14  is  familiar  to  us  all.  Prices  have  risen  almost  to  the 
level  reached  during  the  Napoleonic  Wars.  What  we  have 
to  bear  in  mind  is  that  as  after  these  wars,  they  will  fall 
again  with  equal  fatality  and  completeness.  The  real 
difliculty  ahead  of  us  is  not  the  continuance  of  the  present 
high  price  level,  but  the  characteristic  troubles  which  inevit- 
ably come  as  prices  plunge  downward  over  a  long  series  of 
years. 

Booms  and  depressions.  There  are  two  matters  of  in- 
terest in  connection  with  the  price  changes  shown  on  the 
preceding  diagram.  One  of  these  is  the  interrupted  or 
rhythmic  form  taken  by  the  price  curve,  for  It  will  be  seen 
that  each  of  the  long  swings  Is  in  reality  made  up  of  a  series 
of  smaller  wave-like  forms.  Prices  did  not  move  continu- 
ously downward  from  18 10  to  1850,  for  example,  though 
their  general  trend  through  those  forty  years  was  down- 
ward. But  this  general  trend  was  interrupted  at  intervals 
by  smaller  upward  moves,  followed  again  by  renewed  falls' 
in  prices.     Each  of  these   rises  represented  a  temporary 


THE  RISE  AND  FALL  OF  PRICES  233 

boom  in  business;  and  on  the  other  hand  ended  in  a  financial 
crisis  or  depression.  When  the  crisis  was  very  sharp  and 
acute,  so  as  to  result  in  a  financial  panic,  it  is  apt  to  be 
borne  in  mind  longer  than  when  the  result  is  merely  a  long 
sagging  depression.  For  this  reason  the  literature  of  fin- 
ance will  give  full  details  as  to  at  least  the  later  crises  — 
those  of  1819,  1837,  18575  1873,  1884,  1893  and  1907, 
all  of  which  are  located  at  or  near  the  peak  of  a  rise  in 
prices,  and  at  the  beginning  of  a  more  or  less  long  and  seri- 
ous downward  swing  in  the  price  curve.  The  matter  is  of 
particular  interest  to  us  now,  because  we  seem  to  have 
reached  a  very  remarkable  peak  in  prices  in  1920,  and  we 
may  expect  the  natural  consequences. 

In  popular  opinion,  a  war  is  a  time  of  active  trade,  while 
a  financial  crisis  brings  on  liquidation  and  a  period  of  busi^ 
ness  depression.  It  may  therefore  seem  unorthodox  to  say 
that  a  war  is  economically  an  utterly  bad  thing,  while  a 
financial  depression  is  not  entirely  evil,  though  very  un- 
pleasant. A  crisis  followed  by  a  period  of  low  prices,  how- 
ever painful  it  may  be  at  the  moment,  is  a  period  in  which 
industries  are  being  conducted  economically  and  efficiently. 
A  financial  crisis  is  the  natural  remedy  for  over-expansion, 
for  wasteful  practices,  and  for  personal,  industrial  and 
governmental  extravagance.  Unlike  a  war  period,  a  time 
of  low  prices  is  marked  by  fertility  in  invention,  and  by  the 
careful  and  economical  operation  of  industry  and  business. 
Economies  in  old  processes,  and  experiments  with  new  pro- 
cesses, are  alike  taken  up  most  seriously  when  the  margin 
of  profit  is  low  and  not  when  it  is  high. 

Causes  of  crises.  Something  might  be  said,  in  passing, 
as  to  the  causes  of  these  periodic  alternations  of  depres- 
sion and  prosperity,  and  especially  of  the  causes  of  financial 
crises,  because  there  are  still  too  many  currently  expressed 
opinions  which  are  based  on  limited  observation  or  vitiated 
by  personal  and  political  bias.  It  is  hardly  necessary  to 
recall,  as  instances,   that  popular  agitators  have  ascribed 


234  COAL,  IRON  AND  WAR 

financial  crises  of  world-wide  extent  as  being  due  to  the 
evil  machinations  of  a  few  men  in  Wall  Street;  that  politi- 
cians of  a  little  higher  intelligence  have  credited  depression 
and  prosperity  to  changes  in  the  ruling  party,  to  tariff  modi- 
fications, or  to  legal  enactments  of  one  sort  or  another;  or 
that  bankers  and  business  men,  losing  sight  of  other  and 
more  important  factors,  have  at  times  fallen  to  the  politi- 
cian's level  of  thought  and  placed  too  much  stress  on  purely 
political  or  legal  factors,  or  on  essentially  local  conditions 
as  to  the  currency.  These  misconceptions  would  be  of  little 
importance  if  it  were  not  for  the  fact  that  they  all  tend 
to  accustom  their  acceptor  to  seek  for  a  definite  and  im- 
mediate remedy  for  conditions  which  are  in  reality  too 
general  to  yield  to  such  treatment.  It  is  doubtless  con- 
venient to  look  toward  some  given  man,  toward  some  par- 
ticular law,  or  toward  some  definite  administrative  action  — 
and  to  really  expect  that  the  man,  or  the  law,  or  the  govern- 
ment policy  will  be  able  to  make  a  complete  change  in  fin- 
ancial and  industrial  conditions.  It  may  be  convenient,  but 
it  is  merely  a  survival  of  the  barbaric  superstition  which 
expected  aid  and  protection  from  a  mass  of  wood  or  clay, 
provided  it  were  approached  in  a  hopeful  and  believing 
spirit. 

As  a  matter  of  fact,  study  of  industrial  history  gives  us 
little  reason  to  hope  that  financial  crises  and  industrial  de- 
pressions will  become  less  frequent  or  less  serious  in  the 
future  than  they  have  been  in  the  past.  In  order  that  they 
might  be  completely  avoided  it  would  be  necessary  to  assume 
that  men's  thoughts  and  feelings  will  become  mechanically 
judicial;  that  harvests  will  never  disappoint;  that  wars  and 
natural  disaster  will  cease  to  occur,  and  that  each  laborer 
and  each  capitalist  will  be  satisfied  with  his  present  condi- 
tion in  life.  Until  these  changes  in  general  conditions  are 
brought  about,  we  may  fairly  expect  to  see  periods  of  over- 
enthusiasm  followed  by  periods  of  over-depression. 

The  effect  of  periods  of  depression  upon  the  technical 


THE  RISE  AND  FALL  OF  PRICES  235 

features  of  an  industry  —  economies  and  improvements  in 
practice  —  has  been  noted  in  a  preceding  paragraph.  It 
may  now  be  suggested  that  the  alternation  of  prosperous 
and  depressed  periods  has  certain  relations  to  the  more  gen- 
eral features  of  the  industry  —  and  that  it  affects,  to  a  cer- 
tain extent,  the  general  tendencies  which  all  businesses  show 
toward  expansion  geographically,  toward  integration  and 
toward  combination.  The  existence  of  these  general  tend- 
encies, and  the  manner  in  which  they  manifest  themselves 
in  the  larger  manufacturing  industries  must  be  discussed 
elsewhere.  Here  we  are  only  concerned  with  the  extent  to 
which  they  are  related  to  the  periodic  fluctuations  in  busi- 
ness conditions. 

In  discussing  elsewhere  the  tendencies  of  industrial 
growth,  it  is  stated  that  all  industries  tend  to  develop  along 
four  different,  though  related,  lines.  These  developments 
are  toward  ( i )  increasing  the  size  of  the  individual  mill, 
or  manufacturing  unit;  (2)  expanding  geographically,  so  as 
to  secure  new  markets;  (3)  acquiring  control  of  earlier  or 
later  stages  of  the  manufacturing  process  (integration)  ; 
and  (4)  combination,  of  one  Sort  or  another,  to  secure 
market  control. 

Of  these  four  lines  of  development,  the  first  three  cost 
immediate  outlays,  and  promise  no  immediate  returns.  It 
is  consequently  difficult  to  convince  a  manufacturer,  during 
a  period  of  trade  depression,  that  he  must  increase  the  size 
of  his  mill,  that  he  should  buy  or  build  new  mills  elsewhere, 
or  that  he  should  purchase  the  mines  which  furnish  his  raw 
materials,  or  the  fabricating  plants  which  finally  market 
them.  On  the  other  hand,  when  business  is  highly  pros- 
perous, it  is  easy  to  believe  that  such  developments  are  ad- 
visable, and  to  finance  them.  So  that  ordinarily  we  find 
industrial  companies  extending  their  operations  in  one  or 
all  of  these  lines,  not  during  periods  of  depression,  but  dur- 
ing periods  of  prosperity;  and  frequently  near  the  close  of 
such  prosperous  periods.     Such  developments  are,  in  fact, 


236  COAL,  IRON  AND  WAR 

merely  instances  of  the  general  tendency  toward  over-ex- 
pansion which  necessarily  brings  periods  of  prosperity  to  a 
close. 

With  regard  to  combinations  of  any  type  the  case  is  some- 
what different.  In  so  far  as  these  combinations  are  natural, 
they  are  more  likely  to  come  about  during  periods  of  intense 
trade  depression  than  while  business  is  good.  It  is  only 
when  prices  of  the  product  are  low  that  manufacturers  are 
willing  to  consider  entering  into  combinations  which  must 
necessarily  restrict  their  individual  freedom;  and  it  is  only 
when  profits  are  vanishing  that  they  will  have  reasonable 
ideas  as  to  the  value  of  the  plants.  For  these  reasons  we 
find  that  most  of  the  pools,  agreements  and  combinations 
have,  in  all  countries,  been  formed  during  periods  of  busi- 
ness depression.  To  this  general  statement  there  is  an 
important  class  of  exceptions.  These  relate  to  combina- 
tions formed  primarily  in  order  to  supply  underwriting 
profits  to  promoters  and  bankers.  Obviously  combinations 
of  this  sort  can  be  put  through  with  the  least  risk  during 
the  early  stages  of  a  prosperous  period,  when  confidence  is 
returning  and  money  is  still  free;  and  as  in  this  case  the 
price  at  which  the  individual  plants  are  taken  over  make 
little  difference  to  the  promoter,  there  are  no  counterbalanc- 
ing objections. 

The  course  of  prices.  The  minor  changes  in  prices 
which  we  see  every  five  or  ten  years  coinciding  with  our 
booms  and  depressions,  are  caused  directly  by  the  state  of 
banking  credits  and  business  confidence  or  distrust.  But 
there  have  been,  in  the  world's  history,  price  changes  of 
more  lasting  effects;  and  these  have  been  caused  variously 
by  wholesale  debasement  of  the  currency,  by  paper-money 
inflation  and  government  expenditures,  and  twice  at  least 
by  actual  over-addition  of  gold  and  silver  to  world  cur- 
rencies. 

There  is  no  need  here  to  go  back  over  the  earlier  experi- 
ences in  these  lines.     We  can  commence  with  the  known 


THE  RISE  AND  FALL  OF  PRICES 


237 


fact  that  during  the  early  part  of  the  eighteenth  century 
there  was  a  sagging  price  range  and  commercial  depression, 
due  in  part  to  the  reaction  after  the  long  wars  of  Louis 
XIV.     The  wars  of  the  middle  of  that  century  produced 


1783 

Price. 

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Quarter 

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1803 

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1813 

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1823 

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Fig.  8.     British  wheat  prices,  1783-1823 

their  usual  effects  —  extravagance  and  temporary  higher 
prices  —  but  no  lasting  change.  At  the  commencement  of 
the  twenty-five  years  war  between  Great  Britain  and  the 
French  republic  and  empire,  the  average  price  level  was 


238  COAL,  IRON  AND  WAR 

about  the  same  that  was  afterward  reached  around  1840 
and  again  around  1890  to  1900.  If  we  keep  this  fact  as 
to  the  price  level  preceding  the  Napoleonic  Wars  firmly  in 
mind,  it  will  go  far  toward  clearing  up  later  results. 

As  soon  as  Great  Britain  entered  on  her  long  struggle 
with  France  the  price  level  began  to  rise,  not  because  of 
any  addition  of  gold  or  silver  to  the  currency  of  the  world, 
but  simply  because  all  governments  began  buying  supplies 
freely  and  paying  in  all  sorts  of  excuses  for  real  money. 
The  effects  on  prices  were  worse  in  France  and  England, 
where  the  currency  inflation  began  earliest  and  reached  its 
worst  excesses,  but  they  gradually  spread  all  over  the  world, 
as  the  neutral  nations  sold  in  these  inflated  markets.  The 
accompanying  diagram,  figure  8,  will  serve  to  show  the 
effect  on  the  current  prices  of  British  wheat,  sold  in  its 
home  market,  during  the  years  1783  to  1823  inclusive. 
This  period  has  been  selected  because  it  shows  the  low  levels 
before  the  war,  the  war  inflation  and  the  sharp  fall  follow- 
ing the  peace. 

Wheat  has  been  selected  as  being  the  only  broad  market 
commodity  of  whose  fluctuations  we  have  steady  records, 
but  all  other  goods  showed  similar  effects.  The  rise  in 
prices  for  a  number  of  raw  or  manufactured  commodities 
is  given  in  the  table  below: 

Napoleonic  War  Effects  on  Prices 

1780-17S5  1805-1815 

Wheat,  per  quarter 40  shillings  126  shillings 

Lead,  per  ton 350         "  625 

Spanish  wool,  per  pound 7^  cents  $1.80 

Pig  iron,  per  ton 70  shillings  180  shillings 

Copper,  per  hundredweight 80         "  143 

These  figures  might  be  extended  indefinitely,  but  it  will 
be  simpler  to  summarize  the  matter  by  saying  that  between 
1783  and  18 13  prices  of  all  commonly  used  goods  rose 
from  150  to  %po  per  jCjent.;  on  ;the  average  prices  were  2^4 


THE  RISE  AND  FALL  OF  PRICES  239 

times  as  high  during  the  last  days  of  the  war  as  they  had 
been  before  it.  This  is  of  interest  now,  because  we  have 
seen  almost,  though  not  quite  as  great  a  rise  produced 
recently  by  the  World  War.  And  this  earlier  case  is  of 
importance  because  then  there  was  no  complication  intro- 
duced by  a  large  new  gold  supply.  We  can  credit  all  the 
price  rise  during  the  period  1785  to  18 15  to  government 
purchases  and  financing.  In  considering  price  conditions 
to-day,  it  will  be  well  to  realize  that  this  is  no  new  thing 
which  has  befallen  us,  but  that  precisely  the  same  pheno- 
mena, in  somewhat  greater  degree,  appeared  during  the 
previous  great  world  war. 

The  financial  and  commercial  sequel  to  the  Napoleonic 
adventure  should  also  be  of  interest,  since  it  points  out  the 
course  which  our  present  prices  will  follow.  The  Allied 
successes  in  18 13  made  the  end  of  the  wars  seem  near, 
and  there  was  a  purely  anticipatory  break  in  prices  in  18 13 
which  continued  after  peace  was  declared  finally.  In  18 15 
England,  preparing  to  dump  goods  in  the  markets  of  the 
world,  which  it  was  assumed  were  bare  of  necessities,  found 
that  there  was  really  no  pressing  demand  for  commodities. 
There  had  been  local  manufacture  everywhere,  even  in 
America,  and  in  the  war-ridden  countries  of  Europe.  So 
goods  were  thrown  away,  literally  —  ships  lay  in  New  York 
harbor  whose  cargoes  could  not  be  sold  for  enough  to  pay 
for  unloading.  Prices  broke  with  violence  in  all  lines,  and  a 
financial  crisis  supervened,  so  that  the  period  18 15  to  18 19 
was  our  first  world-wide  time  of  financial  and  commercial 
stress.  By  a  series  of  jerky  descents  prices  finally  fell,  by 
1845  o^  thereabout,  to  about  their  pre-war  level,  the  bulk 
of  the  fall  being  accomplished  in  the  years  immediately  fol- 
lowing the  war.  If  we  accept  100  as  the  average  price 
level  of  1785,  we  might  say  that  prices  reached  over  250  by 
1810;  but  that  within  a  year  after  Waterloo  they  had 
dropped  to  125,  and  by  1845  to  their  original  100. 

The  period  between  18 15  and  1845  was  not,  as  will  be 


240  COAL,  IRON  AND  WAR 

seen  by  referring  to  figure  6,  a  steady  descent  In  prices.  It 
was  marked  by  a  series  of  booms  and  collapses;  the  former 
caused  successively  by  land  speculations  and  later  railroad 
construction  in  the  United  States  and  South  America,  as 
well  as  in  Europe.  The  collapses  came,  in  each  case,  when 
much  of  the  world's  capital  had  been  locked  up  in  enter- 
prises which  were  either  utterly  useless  or  remotely  pro- 
ductive, a  condition  which  had  to  be  corrected  by  financial 
crises  and  later  commodity  price  recessions. 

Around  1850,  however,  there  was  a  new  feature  in  the 
matter,  for  the  price  level  rose  about  fifteen  per  cent,  above 
its  current  range,  and  remained  fluctuating  about  the  new 
range  for  twenty  years.  This  rise  seems  to  be  due  to  the 
gold  discoveries  in  California  (1848)  and  Australia 
( 1 85 1 )  ;  in  part  to  the  actual  gold  which  entered  the  world's 
currency  systems,  but  in  larger  part  probably  to  the  incite- 
ment to  business  activity  caused  by  the  mere  fact  of  gold 
discoveries  and  the  rush  to  colonize. 

The  gold  discoveries,  the  American  Civil  War  and  the 
Franco-Prussian  War  kept  up  the  price  level  until  after 
1873,  when  a  world-wide  crisis  paid  for  the  previous  over- 
expansion.  After  this  crisis  average  prices  fell,  with  hardly 
any  recovery,  to  a  low  point  in  189 6- 1898,  a  level  lower 
than  had  ever  been  known  before,  even  lower  than  that  of 
the  pre-Napoleonic  period.  From  this  low  level  renewed 
government  losses  in  the  series  of  small  wars  —  the  Span- 
ish-American, the  South  African,  the  Balkan  —  caused  a 
smaller  rise  in  average  prices;  but  by  19 13  this  rise  seemed 
to  have  culminated.  Then  came  the  mad  financial  debauch 
of  19 14-19 1 8,  carrying  prices  within  a  few  years  almost  to 
the  high  point  reached  In  18 10;  and  for  this  we  have  yet 
to  pay. 

It  will  be  seen  that  in  telling  the  story  of  price  changes 
from  1785  to  1920  It  has  not  been  necessary  to  invoke  pro- 
tection or  free  trade  as  causes  of  high  or  low  prices;  bl-metal- 
lism  in  America  does  not  require  note;  Lloyd  George  and 


THE  RISE  AND  FALL  OF  PRICES  241 

Theodore  Roosevelt;  Income  taxes  and  trust  prosecutions 
—  none  of  these  enter  into  the  matter  in  any  serious  way. 
The  story  as  thus  told  is  therefore  not  a  good  campaign 
document,  but  it  is  a  fairly  clear  statement  of  fact.  General 
prices  rise  as  credit  and  currency  expansion  takes  place;  and 
an  unsound  credit  position  is  reached  after  a  period  during 
which  governments  or  individuals  have  spent  too  much 
money  either  in  unproductive  things,  such  as  wars;  or  in 
enterprises  which  are  not  immediately  productive,  such  as 
canals,  railroads,  etc.  When  the  war  ends,  or  when  busi- 
ness over-expansion  is  shocked  into  sanity,  there  Is  usually 
a  financial  crisis,  followed  by  a  long  period  of  falling  prices. 

If  these  facts  were  commonly  understood  and  accepted, 
there  would  be  less  of  agitation  and  foolish  legislation  dur- 
ing periods  of  extremely  high  or  low  prices.  But  as  It  Is, 
we  are  sure  to  have  such  unrest  and  such  legislation  periodi- 
cally, because  high  and  low  prices  affect  different  sections 
of  the  community  in  very  different  ways,  so  that  an  agitator, 
whether  an  anarchist  or  a  banker,  can  always  appeal  to  class 
prejudice  with  absolute  certainty  of  receiving  support.  It 
will  be  of  interest  to  study  briefly  these  differential  effects 
of  prices  on  classes. 

Effects  of  high  prices.  During  periods  of  high  prices 
persons  living  on  fixed  Incomes,  however  derived,  or  on 
relatively  fixed  salaries,  suffer  because  the  purchasing  power 
of  their  Income  is  sharply  decreased.  Wage-earners  do 
not  suffer,  in  general,  because  wages  will  rise  as  commodity 
prices  advance,  and  usually  to  about  the  same  degree.  But 
it  Is  worth  noting  that  In  the  very  last  days  of  a  period  of 
high  prices  there  is  apt  to  be  labor  unrest,  expressed  In 
serious  strikes  or  lockouts,  because  toward  the  very  end  of 
a  boom  prices  are  apt  to  rise,  for  a  time,  faster  than  wages. 
Further,  when  the  boom  Is  very  near  Its  collapsing  point, 
employers  are  apt  to  refuse  further  wage  advances,  feel- 
ing that  their  own  orders  are  beginning  to  come  In  less 
urgently.     Early  In  the  boom,   wage   advances   are  given 


242  COAL,  IRON  AND  WAR 

freely,  because  they  can  immediately  be  passed  on  to  the 
price  of  the  product;  later  this  is  not  so  easy,  and  the  em- 
ployer finally  resists.  So  that  our  worst  labor  troubles  are 
at  the  time  when  industry  can  afford  them  best,  because  the 
market  is  already  beginning  to  be  spotty. 

During  periods  of  high  prices  we  are  always  deluged 
with  remedies,  mostly  of  the  sort  which  require  new  legis- 
lation or  prosecutions.  At  times  the  remedy  in  highest 
popular  favor  is  dissolving  the  more  successful  corpora- 
tions; at  other  times  it  is  the  elimination  of  the  retailer;  at 
still  others,  it  may  be  government  ownership  of  railroads, 
or  old-age  pensions,  or  prohibition.  We  are  a  versatile 
people,  and  have  numerous  remedies  to  suggest.  The  Rus- 
sian mind  is  simpler,  so  that  for  over  a  century  the  standard 
Russian  remedy  for  high  prices  was  to  kill  the  nearest 
Jew.  As  to  actual  results  it  is  a  question  as  to  whether 
either  Russian  or  American  popular  remedies  have  much 
effect. 

Effects  of  low  prices.  During  periods  of  low  prices  the 
class  most  likely  to  be  badly  affected  is  the  farming  group, 
for  agricultural  commodities  will  sell  at  low  prices  while  the 
interest  on  preexisting  mortgages  remains  the  same.  Since 
this  class  has  large  voting  power,  its  remedies  for  low 
prices  are  always  noted  with  attention,  but  fortunately  we 
have  heretofore  escaped  their  actual  practice.  The  com- 
mon type  of  reform  desired  is  some  cheapening  of  the  cur- 
rency, by  issuing  paper  money,  or  by  the  use  of  silver  instead 
of  gold.  A  less  radical  reform  is  the  placing  of  govern- 
ment loans  at  low  interest  rates  on  agricultural  land.  This 
of  course  creates  a  favored  class  of  borrowers,  and  is  to 
that  extent  objectionable  to  the  individualist,  but  the  evil 
effect  is  apt  to  be  less  than  the  good  consequences  in  other 
directions,  so  long  as  the  land  loans  are  not  offered  at  less 
than  the  interest  rate  actually  paid  by  government  itself. 

But  because  the  farmers  of  the  country  have  been  the 
class  which  in  the  past  has  protested  most  vigorously  against 


THE  RISE  AND  FALL  OF  PRICES  243 

low  prices,  we  must  not  conclude  that  they  are  the  only  ones 
who  suffer,  or  that  in  future  they  are  likely  to  be  the 
greatest  sufferers  during  a  long  period  of  low  average 
prices.  The  people  who  lose  during  low  prices  are  debtors, 
of  any  kind  or  condition,  because  they  have  to  pay  interest 
or  principal  on  debts  contracted  when  prices  and  interest 
rates  were  currently  higher.  A  corporation,  for  example, 
which  financed  itself  during  the  past  five  years  by  means  of 
a  bond  issue  at  a  six  to  eight  per  cent,  rate  will  suffer 
severely,  compared  with  less  burdened  competitors,  when 
interest  rates  and  profits  fall  well  below  this  level.  So  far 
as  competition  is  concerned,  either  domestic  or  foreign,  bond 
interest  is  practically  an  item  in  production  cost,  and  a  steel 
company  which  has  managed  to  load  itself  with  a  heavy 
interest  charge  per  ton  of  product  will  be  in  very  bad  posi- 
tion as  compared  with  a  competitor  whose  interest  charges 
per  ton  are  lighter.  Looking  at  the  matter  even  more 
broadly,  this  is  one  of  the  ways  in  which  a  war  reacts  un- 
favorably on  the  countries  or  regions  which  have  been 
most  influenced  by  purely  war  activities  in  the  way  of  trade 
and  manufactures. 

After  the  war  of  1870,  Germany  which  received  a  cash 
indemnity  was  in  far  worse  economic  condition  than 
France,  which  had  lost  both  war  and  money.  The  effect  of 
the  indemnity  was  to  raise  the  German  price  level,  locally, 
above  that  of  other  countries,  so  that  it  encouraged  imports 
of  foreign  goods  and  discouraged  home  manufactures. 
The  effect  of  any  war  indemnities  which  may  be  received 
now  is  open  to  the  same  possibilities,  for  unless  such  in- 
demnities are  applied  very  cautiously  by  the  receiving  gov- 
ernments they  are  likely  to  do  more  harm  than  good.  They 
may  operate  to  prevent  the  fall  In  prices  which  would 
otherwise  be  expected,  or  at  least  to  delay  it  beyond  an 
early  period;  but  in  the  long  run  delaying  the  fall  in  prices 
would  not  result  in  decreasing  its  severity  when  it  did  ar- 
rive. 


CHAPTER  XVIII 
THE  SHARE  OF  THE  WORKER 

In  attempting  to  discuss  the  way  In  which  the  new  indus- 
trialism has  affected  the  laboring  classes  we  meet  with  the 
greatest  obstacles,  arising  chiefly  from  a  perfectly  natural 
but  very  strong  bias  toward  accepting  the  viewpoint  of  a 
particular  class,  whichever  that  class  may  be.  The  case 
would  be  simple  enough  If  we  could  accept  either  of  the 
two  extremes  wholeheartedly,  disregarding  entirely  the 
other  side  of  the  story,  but  it  becomes  difficult  if  we  at- 
tempt to  appraise  fairly  the  results  that  have  been  so  far 
attained,  and  these  that  seem  likely  to  come  about  in  future. 

The  conflict  between  labor  and  capital,  of  which  we  hear 
so  much  to-day.  Is  by  no  means  a  new  thing,  for  it  dates 
back  to  the  beginning  of  civilization.  There  have  always 
been  wide  differences  In  social  and  financial  conditions  be- 
tween different  classes  of  all  peoples.  Modern  industrial- 
ism has  not  brought  these  differences  about;  it  has,  on  the 
whole,  tended  to  decrease  them;  but  It  has  also  brought  the 
division  Into  sharper  outline,  and  It  has  removed  our  earlier 
sanctions  for  accepting  It  as  a  necessary  permanency. 
These  changes,  which  have  given  the  conflict  Its  present  im- 
portance, are  due  to  the  facts  that,  owing  to  the  Machine 
Civilization,  we  no  longer  deal  with  employers  and  laborers 
as  individuals,  but  as  organizations.  Concurrently  with  the 
rise  of  the  Industrial  corporation,  supplanting  the  individ- 
ual employer,  there  has  been  the  rise  of  the  labor  union, 
replacing  the  individual  laborer.  And  along  with  this  we 
have  become  rationalistic  In  thought,  so  that  we  can  no 
longer  offer,  as  an  easy  solution,  any  hereditary  or  divine 
sanction  for  the  conditions  we  find.     So  that  now  we  have, 

244 


THE  SHARE  OF  THE  WORKER  245 

in  place  of  an  unorganized  difficulty,  which  could  be  ex- 
plained as  an  act  of  God,  a  more  sharply  defined  difference 
between  two  organized  bodies,  to  be  dealt  with  on  purely 
materialistic  grounds. 

It  is  this  change  in  organization  and  in  mental  attitude 
which  has  given  the  class  conflict  its  present  intensity  and 
bitterness,  so  that  in  looking  at  any  individual  instance  we 
are  apt  to  overlook  entirely  the  vast  progress  that  has  al- 
ready been  made,  and  the  very  natural  ways  in  which  this 
progress  was  really  accomplished.  And  we  are,  above  all, 
very  likely  indeed  to  overlook  the  fact  that  the  bulk  of  the 
improvement  in  labor  conditions  has  been  due  to  technical 
and  scientific  advances,  and  not  to  legislation  or  revolution. 
We  do  not  need  to  apologize  for  the  Machine  Civilization; 
the  steam  engine  found  a  very  poor  and  miserable  world 
indeed,  and  it  has  gradually  made  that  world  better,  in 
a  material  way  at  least.  More  than  this  it  can  not  do,  but 
it  will  continue  to  do  this  faithfully  if  foolish  laborers  — 
and  foolish  capitalists  —  do  not  try  to  wreck  the  machinery 
that  has  been  built  up. 

Labor  conditions.  At  the  outset  of  the  modern  period, 
labor  conditions  in  Europe  were  at  one  of  the  lowest  points 
reached  during  historic  times.  The  first  half  of  the  eight- 
eenth century,  with  wars  and  bad  harvests,  had  shown  In 
every  direction  of  trade  and  industry  a  falling  off  from  the 
better  conditions  that  had  marked  an  earlier  period,  and 
these  conditions  naturally  reacted  most  painfully  upon  the 
agricultural  laborer  and  on  the  workman  in  the  few  mines 
and  mills  then  operated.  It  may  be  recalled,  for  example, 
that  even  In  Scotland  the  coal  miners  were  serfs,  attached 
to  the  mine  and  transferrable  with  it,  until  around  the  time 
of  the  American  Revolution.  Without  some  such  back- 
ground as  this  we  can  not  so  clearly  see  the  advances  that 
came  later.  What  was  described  as  sheer  brutishness  in  the 
labor  conditions  of  1830  would  have  been  passed  by  with- 
out comment,  as  entirely  normal  in  the  labor  world  of  1770, 


246  COAL,  IRON  AND  WAR 

Critics  of  Industrial  conditions,  it  may  also  be  noted,  tend 
to  fix  their  attention  on  England,  and  particularly  on  the 
English  textile  industries.  In  so  doing  they  overlook  en- 
tirely the  fact  that  England  was  only  one  part,  though  a 
very  important  part  it  is  true,  of  a  very  closely-knit  Euro- 
pean civilization,  and  that  she  could  not  entirely  dissociate 
her  fortunes  from  those  of  the  world  at  large.  It  Is  true 
that  labor  conditions  were  bad  In  Great  Britain  in  1815,  and 
for  a  decade  or  more  thereafter,  but  they  were  far  worse 
elsewhere.  The  truth  of  the  matter  was  that  for  twenty- 
five  years  the  European  world  had  been  wasting,  in  the  mad 
orgy  of  the  Napoleonic  wars,  the  accumulated  wealth  of 
centuries,  and  It  was  a  very  poor  Europe  indeed  which 
emerged  from  these  wars.  If  it  had  not  been  for  the  very 
Industrialism  which  is  so  bitterly  criticized,  it  might  have 
been  centuries  before  Europe  recovered  from  the  war  losses. 
As  It  was,  England  had  been  sheltered  through  this  period, 
and  an  undreamed  of  manufacturing  ability  had  been  able 
to  develop  there  freely,  even  during  the  stress  of  war. 
And  it  was  this  new  industrialism  which  made  it  possible 
to  replace  the  physical  losses  with  an  unexpected  rapidity. 

When  Great  Britain  first  began  to  practise  modern  indus- 
trialism. In  the  shape  of  large-scale  machine  production, 
toward  the  close  of  the  eighteenth  century,  the  immediate 
effect  on  British  labor  conditions  was  unqualifiedly  good. 
The  machinery  was  simple,  and  did  not  require  a  long  ap- 
prenticeship; and  It  was  possible  to  pay  far  higher  wages 
per  day  to  a  machine  laborer  than  to  a  hand  laborer.  The 
natural  result  was  that  there  was  a  large  flow  of  labor 
Into  the  new  Industries,  and  a  labor  surplus  began  to  ac- 
cumulate In  and  near  the  great  manufacturing  centers,  while 
there  was  a  relative  deficiency  in  farm  labor  and  in  the 
handicrafts.  These  secondary  effects  were  natural  enough, 
but  their  results  were  bad  for  labor  and  bad  for  the  country 
at  large,  though  this  latter  phase  of  the  matter  escaped  at- 
tention for  a  long  time.     At  the  moment  English  politicians 


THE  SHARE  OF  THE  WORKER  247. 

were  engaged  in  suppressing  the  revolutionary  ideas  of 
France,  and  English  philanthropists  were  interested  in  the 
question  of  negro  slavery  abroad.  No  one  paid  much  at- 
tentions to  the  condition  of  British  labor  at  home,  until 
conditions  get  so  notoriously  bad  that  even  Parliament 
could  no  longer  evade  their  consideration. 

A  series  of  Parliamentary  committees  developed  the  facts 
that  labor  conditions  in  some  industries  —  particularly  in 
the  textile  factories  and  the  coal  mines  —  had  become  in- 
tolerable, and  that  women  and  children  were  being  worked 
under  circumstances  of  revolting  brutality.  In  both  cases 
there  were  obvious  advantages,  because  in  a  cotton  factory 
the  actual  physical  strength  required,  at  any  given  moment, 
is  trifling,  and  a  child  is  almost  as  effective  as  a  man  in  some 
of  the  operations.  In  narrow  coal  seams,  too,  boys  and 
girls  take  up  less  space  than  donkeys  or  dogs,  and  their  cost 
of  upkeep  and  replacement  is  less. 

It  would  be  pleasant  to  assume  that  these  conditions  were 
due  to  a  purely  local  cause  —  that  the  British  employer  is 
racially  more  brutal  than  others,  or  that  a  century  has 
removed  these  possibilities  everywhere.  Unfortunately 
neither  can  be  held  proven.  In  Belgium,  for  example,  as 
late  as  1892  there  were  still  some  twenty  thousand  children 
of  both  sexes,  employed  underground  in  coal  mines.  And 
it  was  in  the  twentieth  century  that,  visiting  a  southern  cot- 
ton mill  by  chance,  I  saw  children  of  five  and  six  years  old 
working  ten  hours  a  day.  In  an  adjoining  state,  the  same 
year,  there  were  women  and  ten-year  old  boys  working  in 
iron  mines,  rented  out  to  the  owners  by  the  State. 

Labor  conditions  can  not  therefore  be  left  entirely  to 
chance,  for  even  if  the  vast  majority  of  employers  are  in- 
telligent, there  are  in  every  country  a  few  stupid  enough  to 
believe  that  cheap  labor  means  low  costs,  and  this  stupid 
minority  can  do  a  great  deal  of  damage.  Experience  has 
shown  that  with  regard  to  the  employment  of  women  and 
children,  and  unsanitary  or  dangerous  working  conditions, 


248  COAL,  IRON  AND  WAR 

legislative  control  is  necessary.  This  of  course  requires  a 
certain  degree  of  civilization  in  the  country  adopting  such 
legislation,  but  that  level  has  been  reached  in  most  of  the 
countries  which  we  consider  at  all  progressive.  Such  legis- 
lation has  in  most  cases  been  adopted  as  the  direct  result 
of  the  pohtical  pressure  employed  by  organized  labor,  and 
it  is  one  of  the  few  clearly  beneficial  results  attained  by 
labor  organizations.  Every  one  will  agree  that  their  action, 
in  such  cases,  has  been  entirely  for  the  good  of  the  com- 
munity. 

The  rise  of  wages.  With  regard  to  the  next  point  to 
be  considered  —  the  wages  received  by  the  laborer  —  the 
case  is  not  so  clear  as  to  either  the  facts  or  the  influence  at 
work.  There  has  been  a  general  rise  in  wages,  looking  at 
the  matter  very  broadly,  which  has  now  lasted  for  over  a 
century,  and  this  general  upward  trend  of  wages  has  per- 
sisted even  during  the  long  periods  when  all  commodity 
prices  were  steadily  falling.  The  result  is  that  not  only 
does  the  average  laborer  receive  more  dollars  per  year  now 
than  in  1800  or  1850,  but  he  received,  at  least  until  the  be- 
ginning of  the  World  War,  a  far  larger  purchasing  power, 
as  measured  by  the  amount  of  food  or  clothing  or  transpor- 
tation he  could  buy  with  his  wages.  This  is  brought  out 
very  clearly  if  we  compare  the  two  sets  of  data  for  the 
period  1850-19 10  for  example,  for  it  will  be  found  that 
during  that  long  period  wages  rose  on  the  whole  quite 
steadily;  and  that  commodity  prices  fell,  on  the  whole,  al- 
most as  steadily.  The  net  result  to  the  laborer  was  that  his 
real  wages  —  the  purchasing  power  of  the  money  received 
—  rose  throughout  most  of  the  period. 

Periods  of  labor  unrest.  During  the  World  War  wages 
followed  commodity  prices  very  closely  in  most  countries 
and  most  occupations,  until  near  the  close  of  the  period  at 
least.  A  point  is  here  brought  up  which  requires  atten- 
tion, as  going  far  toward  explaining  the  periodicity  of  gen- 
eral labor  unrest,     It  is  brought  out  on  comparison  of 


THE  SHARE  OF  THE  WORKER  249 

wages  and  commodity  prices,  over  long  periods  of  years, 
covering  recurrent  booms  and  depressions  in  trade  and  in- 
dustry. 

During  the  greater  part  of  a  cycle  in  trade,  embracing  a 
boom  and  a  depression,  wages  seem  to  tend  to  rise  and  fall 
in  close  correspondence  with  commodity  prices.  But  at 
certain  periods  in  the  cycle  this  close  correspondence  fails 
to  operate,  and  at  such  points  of  the  trade  cycle  we  have 
acute  labor  conditions.  There  are  in  general  two  such  fric- 
tion points.  One  occurs  near  the  end  of  a  long  boom,  as  at 
the  end  of  the  war  when  commodity  prices  are  still  rising  but 
purchasing  power  is  becoming  doubtful.  At  such  times 
there  will  be  demands  for  increased  wages,  natural  enough 
from  the  labor  standpoint,  but  which  the  employer  can  not 
safely  grant,  because  the  prices  of  his  products  can  not 
be  raised  accordingly.  The  second  friction  point  comes 
near  the  end  of  a  long  depression,  when  there  is  actual  tem- 
porary over-supply  of  labor;  and  at  such  times  the  demands 
are  not  for  higher  wages,  but  that  work  of  some  sort  should 
be  supplied,  commonly  at  government  expense. 

These  two  types  of  labor  disturbance  are  with  us,  at  In- 
tervals, and  seem  likely  to  continue  as  long  as  business  goes 
through  periodic  waves  of  prosperity  and  depression. 
Meantime,  in  the  long  run,  real  wages  have  increased 
steadily  and  largely. 

The  organization  of  labor.  In  these  days,  when  large 
masses  of  men  and  money  are  employed  industrially,  it  is 
obviously  necessary  that  both  labor  and  capital  be  held  to- 
gether in  some  definitely  organized  and  integrated  form. 
So,  just  as  capital  works  through  the  medium  of  the  cor- 
poration, so  labor  will  be  Integrated  in  similar  fashion.  We 
may  assume  that  in  future  we  will  always  deal,  not  with 
individual  laborers,  but  with  a  labor  organization  of  some 
sort;  the  only  question  is  to  the  form  which  this  labor  or- 
ganization is  likely  to  take. 

The  labor  organization  may  be  based  on  the  trade  as  a 


250  COAL,  IRON  AND  WAR 

unit,  in  which  case  the  final  result  is  the  trades  union  of  to- 
day; or  it  may  be  based  upon  the  shop  or  business  as  a  unit. 
In  the  former  case  there  are  serious  industrial  disadvan- 
tages, looking  at  the  matter  merely  from  the  standpoint  of 
technical  efficiency.  A  labor  organization  formed  in  this 
fashion  has  only  one  really  effective  argument  or  weapon  — 
the  strike.  To  make  a  strike  effective  there  must  be  the 
closed  shop,  so  that  we  finally  arrive  at  the  necessity  for 
forcing  all  employes  to  join  the  union.  With  this,  we  reach 
two  other  difficulties,  which  both  make  for  decreasing  in- 
dustrial efficiency.  One  is  the  general  tendency  toward 
limitation  of  output,  the  pace  being  set  by  the  slowest  pos- 
sible worker.  The  other  is  the  equally  obvious  tendency 
toward  a  freer  employment  of  sympathetic  strikes,  or  even 
of  the  general  strike,  as  an  end  result  of  a  purely  local  and 
individual  labor  dispute. 

So  far  our  greatest  developments  have  been  along  the 
line  of  trade  unions  of  precisely  this  type,  ending  in  their 
combination  as  a  federation  of  unions.  This  growth  has 
been  permitted  under  the  law,  so  that  now  we  face  actual 
monopolies  of  labor  In  certain  trades  and  occupations. 
But  with  Increase  In  size  and  power  come  Increases  in  re- 
sponsibilities, both  legal  and  moral;  and  these  arise  from 
the  very  facts  of  the  case.  A  trade  union  Is  not  a  natural 
phenomenon;  it  is  a  body  of  workers,  permitted  by  the 
State  to  associate  for  certain  definite  purposes,  and  to  act 
as  a  body  through  Its  authorized  agents.  It  has  an  unique 
status  In  one  regard,  for  It  Is  given  the  privilege  of 
monopoly.  If  it  be  possible  to  persuade  one  hundred  per 
cent,  of  the  workers  In  any  trade  to  join  a  union,  there  Is 
not  the  slightest  legal  obstacle  to  such  a  course,  yet  an 
absolute  monopoly  Is  obviously  formed  In  this  manner. 
Now  the  necessary  relations  of  the  public  and  the  State  to 
a  monopoly,  however  formed,  are  becoming  clearly  under- 
stood. When  we  discuss  industrial  corporations  it  Is 
stated,    without   hesitation   or    fear   of   dissent   from   any 


THE  SHARE  OF  THE  WORKER  251 

quarter,  that  If  the  state  permits  or  encourages  the  forma- 
tion of  a  monopoly  of  any  sort  it  must  be  prepared  to  regu- 
late the  prices  of  the  product  and  the  conditions  under 
which  it  is  marketed.  No  body  or  class  of  men,  entrusted 
with  monopolistic  power,  is  so  entirely  altruistic  as  safely 
to  be  left  uncontrolled. 

This  reasoning,  clear  enough  as  applied  to  manufactur- 
ing corporations,  must  be  equally  clear  and  valid  as  applied 
to  labor  organizations.  If  a  union,  or  group  of  unions,  is 
permitted  to  form  a  monopoly  in  the  labor  supply  for  any 
given  industry,  it  is  clear  that  the  State  must  retain  and 
exercise  the  power  of  interfering  in  labor  disputes,  by  for- 
cible arbitration  or  otherwise.  This  is  particularly  the  case 
when  the  dispute  is  likely  to  be  wide-spread  in  its  effects  upon 
the  community  at  large,  as  when  it  involves  transportation 
or  fuel  supplies. 

On  the  other  hand,  it  is  by  no  means  necessary  that  the 
labor  organization  takes  the  form  of  a  union  made  up  of  all 
the  workers  in  a  given  trade.  It  may,  just  as  logically, 
take  an  entirely  different  form,  being  made  up  of  all  the 
workers,  of  all  sorts,  in  the  employ  of  a  given  business  or 
shop.  This  does  not  give  the  same  opportunity  for  public 
display  or  political  action,  but  it  has  certain  advantages  for 
industry.  With  a  labor  organization  based  on  the  individ- 
ual business  the  interests  of  employer  and  employed  are  to 
a  certain  extent  identical;  and  can  be  made  very  closely  so 
if  there  be  any  proper  attempt  at  working  out  a  system  of 
profit-sharing. 

Whatever  system  may  be  finally  reached,  it  will  have  to 
be  borne  in  mind  that  our  ultimate  interest,  from  any  stand- 
point, is  to  secure  the  greatest  production  of  useful  com- 
modities with  the  least  expenditure  of  human  labor.  That 
end  represents  the  ideal  for  capital  and  labor  alike,  and  for 
consumer  as  well  as  for  producer. 

It  will  be  seen  later,  when  we  come  to  discuss  the  world 
competition  of  the  future,  that  there  is  good  reason  for 


252  COAL,  IRON  AND  WAR 

anticipating  a  period  when  the  economic  pressure  on  the 
United  States  and  Europe  will  be  greatly  intensified,  owing 
to  the  competition  of  a  newly  risen  Asiatic  industrialism. 
When  that  time  comes  it  will  be  very  evident  that  it  is  to 
the  interest  of  all  of  us  that  our  own  industrial  machinery 
works  with  the  minimum  of  internal  friction  and  with  the 
maximum  of  sheer  technical  efficiency. 


CHAPTER  XIX 
THE  DEVELOPMENT  OF  THE  CORPORATION 

In  previous  chapters  we  have  spoken  of  industrial  de- 
velopment, of  its  causes  and  its  effects,  without  consider- 
ing the  structure  of  the  units  or  organisms  which  really 
taken  together,  are  responsible  for  this  growth  and  these 
effects.  We  must  now  turn,  therefore,  from  consideration 
of  industry  as  a  whole,  to  study  of  the  manner  in  which  its 
active  units  have  developed  in  the  course  of  the  past  cen- 
tury or  so. 

This  question,  like  that  of  tariffs  and  socialism,  has  be- 
come so  largely  the  subject  of  partisan  politics  and  litera- 
ture that  it  is  difficult  to  realize  its  essentially  normal  charac- 
teristics. So  long  as  we  confine  attention  to  any  one  coun- 
try, or  any  one  industry,  we  are  apt  to  be  misled  by  ac- 
cepting local  or  individual  characters  as  being  of  general 
occurrence;  and  on  the  other  hand  we  are  apt  to  ascribe 
entirely  general  and  normal  developments  to  the  work  of 
individual  men  or  of  particular  government  policies.  But 
when  we  come  to  examine  the  field  more  broadly,  we  find 
that  in  all  countries,  during  recent  times,  all  large  scale 
industries  have  shown  similar  tendencies  toward  growth 
along  several  lines,  and  that  these  tendencies  have  brought 
about,  again  in  all  countries,  similar  changes  in  business 
organization  or  structure.  By  studying  the  matter  in  this 
way  we  may  perhaps  keep  clear  from  the  dangers  of  local 
or  class  bias. 

The  evolutionary  tendencies  manifested  everywhere  in 
industry  have  taken  two  general  lines  of  progress,  and  their 
effects  are  shown  in  two  very  distinct  ways.  Though  great 
confusion  of  thought  seems  to  exist  regarding  the  relation- 
ship of  the  two  series  of  effects,  they  are  in  reality  very 
different,  both  in  their  underlying  causes  and  in  their  visible 

253 


254  COAL,  IRON  AND  WAR 

or  material  effects.  It  will  therefore,  make  for  clearness 
if  we  discuss  them  under  two  entirely  separate  headings, 
according  as  they  are  (I)  processes  connected  with  the 
growth  of  individual  business  units,  or  (II)  processes  in- 
volving combination  or  merger  of  different  units. 

I.     Individual  Expansion 

All  successful  large  scale  businesses,  in  all  countries, 
whether  conducted  by  individuals,  by  partnerships  or  by 
corporations,  show  tendencies  toward  expansion  of  the  busi- 
ness unit  in  certain  definite  directions.  These  lead  respec- 
tively toward 

a.  Integration  of  the  industry,  by  acquisition  of  supplies 
of  raw  materials  or  by  taking  up  further  finishing 
processes  with  the  old  products. 

b.  Increase  in  the  size  of  the  operating  unit,  by  simple 
growth  in  capital  and  output. 

c.  Geographic  expansion,  by  reaching  out  into  new 
markets,  domestic  or  foreign. 

It  should  hardly  be  necessary  to  say  that  growth  in  the 
three  directions  above  outlined  is  entirely  natural  for  a  suc- 
cessful business,  whether  that  business  be  conducted  by  an 
individual,  a  partnership  or  a  corporation.  The  general 
public  has  no  interest  in  preventing  or  retarding  such 
growth,  and  as  a  matter  of  fact  has  some  interest  in  foster- 
ing it.  The  Government,  of  course,  has  no  interest  what- 
ever in  the  matter,  unless  the  expansion  is  taking  place 
under  a  despotic  government  which  needs  money.  In  that 
case  there  will  be  some  gain  to  the  governing  class,  whether 
that  class  be  an  hereditary  aristocracy  or  a  pseudo-repre- 
sentative bureaucracy,  in  levying  extra  taxes  upon  indus- 
trial growth  under  the  guise  of  regulation  or  license.  These 
relations  are  summarized  here  so  that  there  will  be  no 
necessity  for  referring  to  them  later.  Our  chief  interest  is 
rather  with  the  effects  of  industrial  growth  of  the  busi- 
ness unit  itself,  than  with  its  exterior  relations. 


THE  DEVELOPMENT  OF  THE  CORPORATION       255 

Progress  of  integration.  Taking  up  the  first  of  the  in- 
dustrial tendencies,  we  have  to  deal  with  the  universal 
growth  of  integration  In  the  larger  industries.  In  the  sense 
in  which  it  is  here  used,  integration  is  the  process  of  building 
up  an  Individual  business  unit  (whether  it  be  a  firm  or  cor- 
poration) until  It  has  acquired  an  independent  position  In 
all  the  stages  of  its  Industry,  from  the  mining  of  its  raw 
materials  to  the  fabrication  and  sale  of  finished  products. 
This  process  does  not  necessarily  Involve,  at  any  stage, 
either  the  acquisition  of  competitors,  the  suppression  of 
competition,  or  the  control  of  prices.  It  Is  carried  out  to 
greatest  perfection,  indeed,  under  a  purely  competitive 
regime.  Regarded  economically.  It  Is  a  purely  natural 
and  logical  growth,  restrained  only  by  lack  of  capital  or 
lack  of  enterprise,  and  it  makes  for  economy  throughout 
the  entire  series  of  manufacturing  and  selling  operations. 
It  has,  moreover,  no  direct  or  Indirect  effect  on  prices,  and 
carries  with  It  no  Implication  as  to  market  control. 

Until  within  the  past  decade  no  one.  In  any  country,  had 
ever  suggested  that  integration  had  any  evil  effects  either 
on  the  Industry  or  on  the  consuming  public.  Recently,  how- 
ever, there  have  been  direct  attacks  upon  the  Integrating 
process.  It  Is  true  that  these  attacks  so  far  have  related 
chiefly  to  one  particular  Industry.  But  It  happens  to  be  a 
very  Important  Industry,  and  the  criticisms  of  Its  integra- 
tion were  based  on  entirely  general  grounds.  If  they  are 
to  be  accepted  as  logical  In  this  particular  case,  they  can 
be  applied  just  as  well  to  any  other  thoroughly  integrated 
Industry,  whatever  Its  nature  or  type. 

The  steel  industry  affords  the  best  example  of  a  busi- 
ness v/hlch  has  arrived  at  a  practically  uniform  stage  of  in- 
tegration throughout.  This  fact  Is  rarely  recognized  in 
popular  discussion,  for  the  current  opinion  seems  to  be  that 
one  large  corporation  is  the  only  business  unit  which  has 
taken  up  all  the  possible  stages  of  manufacture.  It  will 
therefore  be  well  to  outline  briefly  the  actual  situation,  and 


256  COAL,  IRON  AND  WAR 

to  show  what  are  the  possibilities  and  the  actual  results  of 
integration  in  the  American  steel  trade. 

In  the  course  of  manufacturing  a  finished  steel  product, 
there  are  a  number  of  stages  in  the  manufacture,  each  of 
which  could  conceivably  be  carried  on  by  a  separate  com- 
pany. The  following  grouping  is  convenient,  and  suffi- 
ciently precise  for  our  present  purposes: 

I.  Ownership  and  mining  of  raw  materials;  including 

ore,  coking  coal,  fluxing  stone,  etc. 
II.  Transportation  of  raw  materials  to  blast-furnaces. 
III.  Production  of  pig  iron  in  blast-furnaces. 

IV.  Conversion  of  iron  to  steel  in  steel  furnace  or  con- 

verter. 

V.  Rolling  of  steel  ingots  into  structural  shapes,  rails, 

sheets,  bars,  rods,  etc. 
VI.  Further  treatment  of  some  of  the  products  from  V, 
by  finishing  into  wire,  nails,  tinned  sheets,  etc.,  or 
by  fabrication  into  columns,  bridge  material,  etc. 

It  has  been  said  that  conceivably  each  of  these  six  stages 
in  the  manufacture  could  be  carried  out  by  a  different  inde- 
pendent company.  As  a  matter  of  fact,  there  have  been 
times  and  localities  where  this  ideal  of  sub-divided  indus- 
try has  been  pretty  closely  approached.  There  are  still  a 
number  of  independent  mines,  railroads  and  finishing 
plants;  so  that  stages  I,  II  and  VI  are  quite  commonly  car- 
ried on  by  companies  which  operate  only  one  stage.  There 
are  also  a  few  furnaces,  mostly  in  the  Middle  West,  which 
buy  all  their  raw  materials  and  sell  all  their  pig  iron  in  the 
open  market,  so  that  stage  III,  on  an  entirely  independent 
basis,  is  still  in  existence.  But  with  these  relatively  slight 
exceptions,  all  American  and  foreign  companies  engaged  in 
the  iron  and  steel  business  carry  out  at  least  two  stages  of 
operation,  while  the  bulk  of  the  world's  steel  output  is  made 
by  a  large  number  of  highly  Integrated  concerns  carrying 
through  at  least  five  of  the  six  possible  stages. 


THE  DEVELOPMENT  QF  THE  CORPORATION       257 

In  order  to  show  the  extent  to  which  the  integrating  pro- 
cess has  actually  been  carried  in  American  and  Canadian 
steel  industries,  the  following  table  has  been  prepared. 
The  data  used  are  taken  from  various  pubHshed  authori- 
tative statements,  and  though  there  may  be  slight  errors  or 
omissions  it  is  believed  that  the  table  may  be  accepted  as 
practically  correct.  They  have  at  any  rate  been  assembled 
without  any  preconceived  ideas  as  to  the  rightness  or  wrong- 
ness  of  a  condition  which  seems  to  be  of  purely  natural 
origin  and  of  practically  universal  occurrence. 

Extent  of  Integration  in  the  American  Steel  Industry 


Name  of  company  or  group 


Stages  Included  under  One  Control 


I 

II 

III 

IV 

v 
5 

VI 

•d 

s 

V 

3 

jd 

, 

0 

m 

•0 

1 

s 

3 
cr 

X 

3 

i 

1 

(9 

a 

u 

3 

a 

1 

i 

1 

5  t> 

0 

u 

E 

Ol 

PC 

M 

CO 

Oi 

£ 

4- 

+ 

+ 

+ 

+ 

+ 

4- 

+ 

4- 

+ 

+ 

+ 

+ 

+ 

+ 

4- 

4- 

4- 

+ 

-f 

+ 

+ 

+ 

4- 

4- 

4- 

+ 

+ 

+ 

+ 

+ 

+ 

+ 

4- 

+ 

+ 

+ 

+ 

+ 

4- 

+ 

+ 

+ 

+ 

+ 

+ 

+ 

4- 

4- 

4- 

4- 

-f 

+ 

+ 

+ 

+ 

+ 

4- 

4- 

+ 

+ 

+ 

+ 

+ 

+ 

+ 

+ 

+ 

4- 

+ 

+ 

+ 

+ 

-h 

+ 

4- 

H- 

+ 

+ 

+ 

+ 

+ 

4- 

+ 

+ 

+ 

+ 

+ 

4- 

4- 

4- 

4- 

+ 

+ 

+ 

+ 

4- 

+ 

+ 

4- 

4- 

+ 

+ 

+ 

4- 

+ 

+ 

+ 

+ 

4- 

+ 

+ 

+ 

+ 

+ 

+ 

+ 

+ 

4- 

United  States  Steel  Corporation.. 

Lackawanna    Steel    Company 

Jones  &Laughlin  Steel  Company, 

Republic  Iron  &  Steel  Co 

Colorado  Fuel  &  Iron  Company. 
International  Harvester  Company. 

Dominion  Steel  Company 

Bethlehem  Steel   Company 

Lake  Superior  Corporation 

Midvale   Steel    Company 

Nova  Scotia  Steel  &  Coal  Co. . . 
Virginia  Iron,  Coal  &  Coke  Co.. 

Thomas   Iron   Company 

Empire  Steel  &  Iron  Co 

Sloss-Sheffield  Steel  &  Iron  Co... 

Joseph  Wharton,  Inc 

Witherbee-Sherman  Co 


The  first  group  of  steel  companies  included  in  the  table 
represent  the  bulk  of  the  North  American  steel  output,  and 


258  COAL,  IRON  AND  WAR 

it  will  be  seen  that  they  are  all  highly  integrated,  including 
in  every  case  at  least  five  of  the  six  possible  stages,  and  in 
most  cases  including  all  six. 

The  second  group  in  the  table  includes  a  series  of  fairly 
representative  companies,  located  in  the  east  and  south 
which  make  iron  but  not  steel.  In  this  case,  there  are  only 
three  possible  stages  of  the  industry,  and  on  looking  over 
the  table  it  will  be  seen  that  every  company  of  this  group 
carries  out  all  three  stages,  and  that  most  of  them  carry 
out  all  the  possible  subdivisions  of  these  stages.  The  rail- 
roads credited  to  them  are,  in  a  few  instances,  merely  mine 
or  plant  connections  of  more  than  average  length  or  stand- 
ard of  equipment;  but  in  most  instances  they  are  even  more 
than  this,  being  chartered  and  operated  as  common  carriers. 
Some  of  these  lines  are  quite  extensive,  comparing  favor- 
ably in  size  with  those  handling  Lake  ores.  The  Virginia 
and  Southwestern  Railway,  for  example,  operates  162  miles 
of  line.  Until  quite  recently  it  was  owned  by  the  Virginia 
Iron,  Coal  &  Coke  Company;  and  when  finally  sold  to  the 
Southern  Railway  the  transfer  was  not  made  because  of 
fancied  legal  objections  to  the  old  ownership,  but  for  quite 
other  reasons. 

A  similar  study  made  of  conditions  in  another  very  im- 
portant American  industry  —  the  manufacture  of  Portland 
cement  —  will  show  a  remarkable  similarity  in  extent  of 
integration,  but  with  two  very  striking  points  of  difiference. 
Practically  every  cement  plant  in  the  United  States  owns 
and  operates  its  own  limestone  quarry.  Its  shale,  clay,  or  slag 
supply;  and  the  transportation  of  these  raw  materials  from 
quarry  to  mill  Is  accomplished  In  almost  every  case  over 
tracks  owned  and  operated  by  the  cement  company.  All 
the  mill  operations  are  of  course  under  direct  company  con- 
trol, and  In  some  few  but  important  instances  the  cement 
company  ships  cement  In  Its  own  cars  or  vessels.  So  far 
the  cement  Industry  Is  thoroughly  Integrated.  But  two 
striking  exceptions,  as  previously  noted,  remain  to  be  con- 


THE  DEVELOPMENT  OF  THE  CORPORATION       259 

sidered.  These  are  in  relation  to  power  and  fuel  supply, 
and  to  the  finishing  of  the  product.  Very  few  cement  com- 
panies own  and  operate  coal  mines;  and  practically  all  of 
them  sell  cement  without  attempting  to  absorb  any  of  the 
profits  to  be  made  from  the  use  of  the  cement.  The  cement 
companies  correspond  therefore  to  blast-furnace  companies, 
and  dispose  of  their  product  at  a  corresponding  stage  of 
finishing. 

The  advantages  of  integration.  When  the  various 
stages  in  an  industry  have  been  thoroughly  knit  together 
under  one  control,  so  that  the  business  is  completely  in- 
tegrated, the  result  will  be  that  a  number  of  advantages  and 
economies  appear.  Most  of  these  will  be  small  of  them- 
selves, though  important  in  their  total  effect;  and  in  most 
cases  they  will  be  commercial,  rather  than  technical,  in  their 
savings.  The  contrary  idea  is  often  given  in  current  dis- 
cussions of  the  subject,  where  one  very  striking  instance  of 
a  technical  saving  —  the  transfer  of  hot  metal  from  the 
blast-furnace  to  the  steel  mill  —  seems  to  have  made  a 
great  impression  on  all  who  have  heard  of  it.  So  far  as  I 
know,  however,  this  is  one  of  the  very  few  technical  ad- 
vantages of  integration,  the  only  other  important  one  be- 
ing the  use  of  waste  furnace  gases  in  the  power  plants  for 
the  mills. 

On  the  other  hand,  the  financial  or  commercial  gains, 
though  not  so  readily  seen  by  the  visitor  to  the  plant,  are 
important  and  continuous.  W^hen  a  company  handles  all 
of  its  own  stuff,  from  raw  material  to  highly  finished  pro- 
duct, it  can  adjust  its  requirements  and  operations  at  every 
stage  so  as  to  secure  the  greatest  ultimate  economy.  The 
raw  materials  used  at  each  stage  will  be  delivered  in  proper 
grade  and  quantity,  controlled  within  the  organization  it- 
self, and  not  subject  to  the  condition  and  vagaries  of  the 
general  market.  In  the  long  run,  the  steadiness  and  regu- 
larity of  operation  thus  induced  will  show  in  the  accounts. 

With  regard  to  the  direct  profits  of  integration,  however. 


26o  COAL,  IRON  AND  WAR 

something  more  must  be  said,  for  the  matter  is  not  so  simple 
in  real  life  as  in  public  documents.  In  some  recent  discus- 
sions of  the  subject  there  is  evidently  present  the  idea  that, 
by  integrating  an  industry,  some  new  and  direct  profits  will 
mysteriously  appear.  This  idea  arises  from  fixing  atten- 
tion on  one  fact,  and  entirely  overlooking  another.  The 
fact  which  is  comprehended  is  that,  in  an  integrated  com- 
pany, one  concern  secures  all  the  intermediate  profits  which 
were  formerly  made  by  the  producers  of  its  various  raw 
materials.  The  fact  which  is  overlooked  is,  that  in  order 
to  do  this,  it  has  been  forced  to  assume  all  of  the  capital 
obligations  of  those  former  independent  producers.  The 
total  profits  of  the  integrated  company  are  greater  than  be- 
fore integration  was  complete,  but  its  capital  requirements 
have  also  grown,  and  in  practically  equal  degree.  There 
is  no  place  in  which  new  direct  profits  can  appear  in  this 
series  of  transactions. 

A  simple  specific  case  may  make  the  matter  clearer.  Let 
us  assume  that  a  furnace  company,  which  has  been  buying 
its  ore  from  a  given  mine,  acquires  that  mine  and  operates 
it  directly.  Now,  if  the  ore  was  formerly  bought  at  a  fair 
price,  and  if  the  mine  is  bought  at  a  fair  corresponding  valu- 
ation, it  is  clear  enough  that  the  ore-mining  profits  will  cor- 
respond merely  to  the  added  capital  outlay;  and  that  the 
question  of  pig-iron  costs  or  profits  has  not  been  changed 
in  any  way  by  the  acquisition  of  the  mine.  What  the  fur- 
nace has  gained  by  the  transaction,  however,  is  the  certainty 
that  its  operations  can  now  be  carried  on  with  absolute 
surety  that  its  supply  of  this  one  important  raw  material 
will  be  under  its  own  control,  and  that  it  will  be  shipped  as 
needed,  both  as  to  quantity  and  grade.  The  gains  are,  as 
seen  from  this  instance,  not  direct  but  indirect. 

We  might  even  go  further  and  say  that,  during  certain 
times  in  our  periodical  business  cycles,  a  furnace  buying  its 
raw  materials  in  the  open  market  will  make  more  money 
than  if  it  had  its  own  supplies.     This  is  due  to  the  fact  that, 


THE  DEVELOPMENT  OF  THE  CORPORATION      261 

In  times  of  stringency,  the  smaller  mines  will  sell  at  close 
to  sheer  mining  cost,  disregarding  depreciation  and  all  other 
theoretical  costs,  and  offering  their  best  grade  of  ore  in 
order  to  attract  purchasers. 

The  legal  status  of  integration.  It  has  been  noted  that 
until  within  the  past  few  years  no  one  ever  seriously  ques- 
tioned the  advantages  of  thoroughly  integrating  a  business 
or  Industry.  The  advantages  to  the  company  were  obvious, 
and  as  the  process  did  riot  involve  suppression  or  even  les- 
sening of  competition,  there  seemed  to  be  little  reason  to  ap- 
prehend pubhc  disadvantages  of  any  sort.  Neither  the 
courts  nor  the  legislatures  had  ever  looked  with  doubt  or 
apprehension  on  the  process,  and  no  statues  had  been  en- 
acted or  suggested  looking  toward  Its  regulation  or  prohi- 
bition. Legally,  the  status  of  integration  is  therefore  ab- 
solutely clear,  with  one  very  individual  but  very  Important 
exception.  The  exception  noted  arises  from  the  fact  that, 
In  legislating  to  prevent  an  entirely  different  condition,  one 
stage  of  the  Integration  process  In  the  steel  industry  may 
have  been  unintentionally  affected.  The  element  concern- 
ing which  this  doubt  exists  is  the  common  ownership  of  in- 
dustries and  transportation  lines.  As  a  purely  legal  ques- 
tion it  will  be  settled  by  the  courts,  and  needs  no  discussion 
here. 

Passing  from  the  question  of  the  existing  legal  status  of 
integration  to  that  of  its  relations  to  a  sound  public  policy, 
it  may  be  suggested  that  there  is  nothing  In  the  Integration 
process  itself  to  which  anyone  could  possibly  take  exception. 
As  already  pointed  out,  it  does  not  necessarily  Involve  the 
acquisition  of  competitors,  the  suppression  or  lessening  of 
competition,  or  the  control  of  prices. 

So  far  as  public  policy  is  concerned,  there  is  therefore 
little  reason  to  believe  that  it  would  be  to  the  public  advan- 
tage to  have  the  different  stages  of  steel  manufacture  car- 
ried out  by  separate  companies.  As  a  matter  of  fact,  the 
objections  made  against  the  policy  of  integration  seem,  in 


262  COAL,  IRON  AND  WAR 

reality,  to  be  based  on  a  misconception  or  confusion  of  ideas. 
If  any  company  has  acquired  complete  control  of  any  given 
stage  in  steel  manufacture,  so  that  its  competitors  have  to 
look  to  it  for  their  supply  of  either  raw  materials  or  semi- 
finished products,  there  would  be  reasonable  ground  for 
.  criticism.  But  in  that  case  the  criticism  should  not  be  di- 
rected against  the  policy  of  integration,  but  against  the 
fact  of  monopoly  in  the  given  stage  of  manufacture. 

Even  regarding  the  control  of  transportation  systems, 
which  is  the  stage  of  Integration  most  open  to  criticism, 
there  is  something  to  be  said  in  its  defense.  In  every  case 
known  to  the  writer  in  which  an  Iron  or  steel  company  owns 
and  operates  a  rail  or  water  line,  the  railroad  or  steamer 
was  built  for  the  purpose  of  adding  to  transportation  facili- 
ties, and  was  not  purchased  for  the  purpose  of  decreasing  or 
monopolizing  them.  In  many  cases,  the  new  transporta- 
tion system  opened  up  new  sources  of  ore  or  coal  supply, 
from  fields  not  adequately  served  by  any  existing  system. 
Under  these  circumstances  it  is  obvious  that,  whatever  may 
be  the  current  view  as  to  the  public  policy  in  regard  to  com- 
mon ownership  of  transportation  and  industries,  there  can 
be  little  question  or  criticism  of  the  causes  which  have 
brought  about  the  present  condition. 

Larger  operating  units.  Second  only  to  integration  in  its 
total  importance,  and  probably  outranking  it  so  far  as  actual 
manufacturing  economies  are' concerned,  is  the  expansion 
in  size  of  the  operating  unit  up  to  its  point  of  maximum 
efficiency.  Growth  In  this  direction  is  entirely  normal,  and 
is  apt  to  be  accomphshed  without  much  attention  being  paid 
to  it  except  by  those  directly  interested  in  the  industry.  Up 
to  a  certain  limit,  varying  with  the  character  of  the  process, 
expansion  in  size  of  unit  shows  a  steady  gain  in  efficiency 
due  chiefly  to  reduction  in  overhead  charges  per  unit  of 
output;  while  at  intervals  in  Its  progress  It  will  show  sud- 
den gains,  due  to  the  fact  that  at  certain  stages  it  becomes 
possible  to  introduce  new  economies. 


THE  DEVELOPMENT  OF  THE  CORPORATION       263 

If,  for  example,  we  assumed  that  a  single  furnace,  oper- 
ated Independently,  was  added  to  until  finally  there  were  ten 
or  twelve  stacks  under  one  control,  it  would  be  found  that 
the  average  cost  of  making  a  ton  of  pig-lron  would  tend  to 
decrease  slowly  but  steadily  as  the  installation  increased  in 
size.  This  steady  decrease  would  be  due  to  the  fact  that, 
to  a  large  extent,  the  necessary  labor,  supervision,  and  capi- 
tal would  not  Increase  as  fast  as  the  output.  On  the  other 
hand,  at  certain  stages  In  this  growth  there  would  be  addi- 
tional and  less  regular  savings,  as  at  the  points  when  the  in- 
stallation was  large  enough  to  justify  the  use  of  its  waste 
gas  or  its  slag  In  some  profitable  way.  The  expansion  in 
size  of  operating  unit  would  therefore  lead  both  to  techni- 
cal advances  and  to  decreases  In  operating  costs. 

Geographical  expansion.  The  third  tendency  In  mod- 
ern industry,  and  generally  the  one  which  appears  latest  in 
the  history  of  any  business  organization.  Is  toward  geo- 
graphic expansion.  After  thorough  integration  of  the  busi- 
ness has  yielded  all  the  economies  of  which  it  Is  capable,  and 
when  its  plant  has  attained  maximum  size  so  far  as  operat- 
ing efficiency  Is  concerned.  It  Is  found  that  there  are  fur- 
ther advantages  attainable  by  growth  In  another  direction. 
This  will  be  along  the  line  of  building  other  plants,  so 
located  as  to  reach  new  markets,  or  at  least  to  supply  por- 
tions of  the  old  markets  on  a  more  economic  transportation 
basis. 

Unless  we  are  dealing  with  light  and  relatively  costly 
articles  of  manufacture,  the  freight  charges  on  the  finished 
product  between  mill  and  consumer  will  often  amount  to 
more  than  the  mill  cost  of  the  product.  This  is  particularly 
so  in  the  case  of  some  of  the  great  staple  products,  like  pig- 
iron  and  cement,  which  are  made  and  sold  for  a  very  low 
price  per  ton.  It  Is  obvious  that  In  dealing  with  such  pro- 
ducts the  cost  of  transportation  between  mill  and  consumer 
may  easily  amount  to  a  very  large  portion  of  the  price 
finally  paid  by  the  consumer. 


264  COAL,  IRON  AND  WAR 

Under  such  conditions,  as  the  business  and  its  markets 
grow,  there  will  finally  come  a  time  when  it  will  be  advis- 
able to  build  new  plants,  at  new  localities,  to  serve  the  more 
distant  portions  of  the  present  market  at  lower  freight 
costs,  and  to  develop  new  markets  if  possible.  Geographic 
expansion  therefore  normally  results  in  an  increase  in  pro- 
ducing capacity,  and  not  in  a  decrease;  in  an  increase  in 
competition,  and  not  in  a  restraint  of  it. 

II.  Combinations  and  Mergers 
In  the  preceding  section  it  has  been  pointed  out  that  all 
large-scale  industries  in  recent  years  and  in  all  countries, 
have  shown  the  same  tendencies  toward  growth  along  cer- 
tain lines.  It  was  further  shown  that  these  processes  of 
growth  were  a  natural  development,  that  they  affected 
merely  the  business  organization  of  the  respective  indus- 
tries, and  that  of  themselves  their  effect  was  rather  to  in- 
crease than  to  diminish  the  sharpness  of  competition.  Any- 
one who  has  been  engaged  in  one  of  these  rapidly  growing 
industries  will  recognize  the  painful  truth  of  the  last  state- 
ment particularly.  With  each  period  of  business  prosperity 
new  plants  are  built,  and  old  ones  are  increased  in  size. 
With  each  following  period  of  business  depression,  the 
struggle  for  the  contracting  market  becomes  more  severe, 
and  prices  are  cut  savagely  to  get  enough  business  to  keep 
the  organization  intact.  Finally,  when  this  has  gone  to  the 
extent  that  a  few  of  the  best-equipped  and  best-located 
plants  can  supply  all  the  market  that  is  left,  at  prices  not 
far  from  cost,  the  process  necessarily  ends. 

The  causes  of  combination.  In  the  days  before  power 
machinery  was  in  use,  the  entire  matter  settled  itself  more 
promptly  and  more  decisively,  but  also  more  cruelly.  For 
in  those  days  the  productive  capacity  of  any  locality  or  in- 
dustry was  Hmited  solely  by  its  labor  supply;  and  over-pro- 
duction was  met  by  a  decrease  in  this  supply.     A  relatively 


THE  DEVELOPMENT  OF  THE  CORPORATION      265 

short  period  of  depression  resulted  in  the  starvation  or 
emigration  of  the  "  productive  capacity,"  and  business  could 
again  start  on  a  firm  footing.  But  in  these  days  of  machin- 
ery surplus  capacity  does  not  disappear  so  easily,  and  the 
stages  in  our  business  cycle  seem  to  come  to  shorter  inter- 
vals. 

In  order  to  meet  these  conditions,  which  seem  to  be  a 
necessary  accompaniment  of  large-scale  industry  when  left 
unregulated,  producers  in  every  line  of  industry  and  in  every 
country  have  attempted,  at  some  time  or  another,  to  regu- 
late in  some  way  the  wider  fluctuations  of  the  markets. 
These  attempts  were  not  ordinarily  made  with  any  monopo- 
listic intent,  but  were  taken  up  as  a  matter  of  sheer  self- 
preservation.  In  some  countries  the  Government  has  ac- 
tively aided  in  these  attempts  at  cooperation  and  regula- 
tion; in  others  it  has  been  merely  a  passive  spectator;  in  a 
few,  including  unfortunately  the  United  States,  it  has  taken 
an  active  part  in  opposition. 

For  our  present  purposes  we  may  speak  of  these  attempts 
at  cooperation  as  cofnbinations,  whatever  may  be  the  pre- 
cise legal  or  illegal  form  which  they  may  have  assumed. 
They  may,  for  example,  have  been  simple  and  temporary 
pools,  more  permanent  and  closely  tied  syndicates  or  cartels, 
or  complete  mergers.  As  a  matter  of  fact,  the  form  taken 
by  combinations  in  different  countries  depends  largely  upon 
the  attitude  of  the  Government  toward  industrial  develop- 
ment. The  desire  for  individual  ownership  is  so  strong  and 
so  persistent  that,  except  in  countries  where  pools  and  cartels 
are  prohibited,  extensive  mergers  rarely  occur. 

A  movement  of  this  type,  toward  some  degree  of  com- 
bination within  the  industry,  is  practically  universal.  It 
is  not  confined  to  high-tariff  countries,  despite  common  as- 
sertions to  the  contrary.  It  is  not  confined  to  industries 
where  the  individual  companies  are  of  large  size,  but  is 
found  in  many  of  the  characteristically  small-scale  industries, 


266  COAL,  IRON  AND  WAR 

as  In  the  retail  trades.  The  drug,  grocery  and  drygoods 
trades  would  probably  furnish  more  examples  of  price  agree- 
ments and  combination  than  would  any  of  the  larger  scale 
manufacturing  industries. 

In  a  recent  study  of  existing  tendencies  in  British  indus- 
tries, McCrosty  has  summarized  strikingly  the  underlying 
conditions  under  a  regime  of  unrestricted  competition  which 
inevitably  tend  to  bring  about  some  degree  of  combination 
or  cooperation  in  all  modern  industries.  I  have  quoted 
this  summary  elsewhere,  in  discussing  the  condition  of  an- 
other American  Industry,  but  the  statement  Is  so  concise  and 
immediately  applicable  to  conditions  in  the  United  States 
to-day  that  It  is  not  necessary  to  apologize  for  Introducing 
It  again : 

With  every  improvement  in  transport  the  market  becomes 
wider  and  competition  becomes  keener  through  the  advent  of 
new  producers,  while  at  the  same  time  it  becomes  more  diffi- 
cult to  make  rational  forecasts  of  the  course  of  trade.  Even 
within  tarifF  walls  competition  always  rages  as  soon  as  it  is 
discovered  that  there  are  certain  industries  to  which  the  law 
has  assigned  the  possibility  of  greater  profits  than  the  average. 
Alike  in  protected  and  unprotected  markets  free  competition 
becomes  cut-throat,  prices  fall,  and  over-production  ensues  in 
the  wild  efforts  of  producers  to  reduce  costs  by  a  larger  output. 
.  .  .  One  might  say  that  the  normal  course  of  modern  trade 
was  that  prices  should  always  tend  toward  the  cost  of  produc- 
tion, that  this  tendency  developed  itself  with  increasing  speed, 
arid  from  time  to  time  ended  in  production  at  a  loss.  Now, 
whatever  one  may  say  about  a  "  social  contract,"  or  the  work- 
ing out  of  the  welfare  of  society  through  the  clashing  self- 
interest  of  individuals,  the  fact  remains  that  the  first  object 
with  which  a  man  enters  business  is  to  make  money,  and  his 
second  to  make  as  much  as  he  can.  Similarly  a  workman 
wants  first  to  get  a  subsistence  wage,  and  next  as  high  a  wage 
as  he  can.  And  if  any  social  institutions  or  trade  methods 
stand  in  the  way  there  will  be  a  revolt.  Such  a  revolt  in  a 
multitude  of  forms  we  are  now  witnessing. 


THE  DEVELOPMENT  OF  THE  CORPORATION       267 

The  advantages  of  combinations.  It  must  be  admitted, 
however,  that  random  statements  and  faulty  arguments  are 
not  always  confined  to  one  side  of  the  discussion.  The  ad- 
vocates of  combination,  regulated  or  unregulated,  are  just 
as  apt  to  present  unfair  reasoning  as  are  the  advocates  of 
unrestricted  competition. 

Disregarding  all  of  the  more  doubtful  claims  which  have 
been  advanced,  there  are  certain  advantages  which  can  fairly 
be  expected  to  result  from  combinations.     These  are : 

I.  Advertising,  selling  and  other  marketing  expenses  can 
ordinarily  be  heavily  reduced,  particularly  in  the  case  of  the 
bulky  and  well-standardized  staples,  such  as  iron,  steel, 
cement,  etc.  The  extent  to  which  these  savings  can  be  car- 
ried will  depend  on  the  form  which  the  combination  has 
taken. 

II.  Business  depressions  can  be  met  with  less  actual  loss, 
for  the  output  can  be  reduced  gradually  and  prices  steadied 
as  the  market  narrows.  Combinations  cannot  prevent  busi- 
ness depressions,  but  they  can  mitigate  some  of  their 
worse  features. 

III.  Overbuilding  can  be  prevented,  and  the  capital 
which  would  otherwise  be  lost  in  unprofitable  plants  can  be 
saved.  This  is  true  only  of  certain  types  of  combination, 
and  its  Importance  then  will  depend  almost  entirely  upon 
the  farsightedness  of  the  combination  management. 

IV.  Excessive  prices  can  be  prevented,  with  far  greater 
ease  than  under  competitive  forms  of  industry.  But,  with 
human  nature  as  It  Is,  it  would  be  unwise  to  hope  for  too 
much  in  this  direction  from  the  average  combination,  un- 
less there  is  some  machinery,  legal  or  natural,  to  aid  in 
preventing  excessive  prices.  This  machinery  may  be  put  in 
motion  by  an  Industrial  commission,  or  in  some  cases  it 
might  be  worked  through  almost  automatic  tariff  changes. 

V.  If  the  combination  is  carried  to  the  extent  of  absolute 
merger,  it  will  also  benefit  on  a  larger  scale  from  the  ad- 
vantages which  have  been  described  in  the  previous  sections 


268  COAL,  IRON  AND  WAR 

on  integration  and  geographic  expansion.  This  however, 
is  not  inherent  in  the  idea  of  combination,  and  can  not  nor- 
mally be  considered  as  a  part  of  its  necessary  gains. 

It  is  obvious,  from  our  statement  as  to  the  character  of 
the  gains  brought  about  by  increase  in  size,  that  there  must 
come  a  point  at  which  these  gains  are  overcome  by  losses 
due  to  the  growing  inefficiency  of  handling  so  large  a  mass. 
This  point  is  difficult  to  define,  in  terms  of  dollars  or  ton- 
nage, but  it  seems  to  have  been  reached  in  the  case  of  some 
of  our  larger  corporations,  where  either  the  size  of  the 
component  units  or  the  mass  of  the  final  corporation  is  so 
great  as  to  give  inefficient  results  as  compared  with  smaller 
competitors. 

For  in  a  corporation,  as  in  the  body  politic  or  in  an  army, 
by  far  the  great  majority  of  the  men  involved  are  not  ex- 
pected or  required  to  think  or  plan,  to  direct  or  invent. 
That  part  of  the  work  falls  on  one  man,  in  the  last  analysis, 
and  upon  relatively  few  men  at  the  most.  This  is  true  of 
the  mine  and  the  mill,  but  it  is  almost  equally  true  of  the 
Board  of  Directors  or  the  Finance  Committee  of  any  nor- 
mally managed  company. 

It  must  be  noted  that  this  is  not  a  criticism  of  the  cor- 
porate form  of  doing  business,  but  rather  the  contrary. 
It  Is  not  that  a  corporation  is  worse  than  a  privately  con- 
ducted business  with  regard  to  this  particular  limitation, 
but  that  either  corporation  or  individual  business  will  some 
day  reach  a  point  at  which  further  expansion  is  uneconomi- 
cal, owing  to  difficulty  in  handling  it.  And  this  furnishes 
one  of  the  strongest  real  arguments  against  either  private 
monopoly  or  government  operation  of  any  large  industry  or 
utility.  In  a  privately  managed  business  the  inefficiency 
which  finally  arrives,  is  paid  for  by  that  particular  business 
unit  In  the  way  of  lessened  profits  or  actual  losses;  it  does 
not  react  on  the  industry  as  a  whole  or  on  the  community  at 
large;  and  it  becomes  visible  to  the  owners  of  the  business 
through   comparison  of  their  results  with  those  of  more 


THE  DEVELOPMENT  OF  THE  CORPORATION      269 

efficiently  managed  competitors.  If  the  industry  were  a 
monopoly,  however,  either  under  private  ownership  or  under 
government  control,  there  would  be  no  standard  with  which 
its  results  could  be  compared,  and  no  possible  check  upon  its 
growing  inefficiency. 


CHAPTER  XX 
LEGISLATIVE  HELPS  AND  HINDRANCES 

In  the  preceding  chapter  the  natural  tendencies  of 
growth  in  modern  industries  have  been  discussed,  so  that 
we  can  arrive  at  some  idea  of  the  form  which  modern  in- 
dustrialism would  be  likely  to  take  if  not  subjected  to 
external  check  or  interference.  But  as  a  matter  of  fact, 
through  all  the  history  of  industrial  development  in  all 
countries,  we  find  that  such  entirely  free  growth  does  not 
take  place,  for  there  is  always  another  force  at  work,  ex- 
ternal to  the  industry.  This  force  is  the  power  of  the  state, 
and  it  will  be  interested  to  consider  to  what  extent  and  in 
what  forms  it  acts  upon  industrial  development. 

Points  of  contact.  It  is  clear  enough  that  conflicting 
theories  as  to  the  relation  of  government  to  industrial 
development  have  acted  in  many  ways  to  aid  or  retard  such 
growth  as  has  occurred.  The  bases  and  ultimate  impli- 
cations of  these  theories  will  be  discussed  later,  but  here 
we  need  only  note  that  the  chief  contact  points  between  gov- 
ernment action  and  industrial  growth  are  along  the  fol- 
lowing lines : 

1.  The  Government  may,  or  may  not,  assume  some  de- 
gree of  control  over  the  units  which  compose  any  given  in- 
dustry. This  control,  expressed  through  corporation  laws, 
may  limit  the  size  of  the  unit,  its  method  of  capitalization, 
and  other  features  of  its  corporate  life. 

2.  The  Government  may,  or  may  not,  afford  direct  aid 
to  industrial  growth  through  the  medium  of  a  protective 
tariff,  of  bounties,  or  of  export  differentials. 

3.  The  Government  may  ignore  attempts  at  combination 
or  market  control,  it  may  oppose  them,  or  it  may  aid  and 
supervise  them. 

270 


LEGISLATIVE  HELPS  AND  HINDRANCES       271 

4.  The  Government  may,  finally,  directly  own  and  operate 
certain  types  of  utilities,  of  natural  resources  or  of  actual  in- 
dustrial units. 

The  initial  bias.  The  political  conflicts  which  are  car- 
ried out  in  all  democratic  countries  are  largely  guided  by 
opportunists,  who  appeal  chiefly  to  the  passions  or  emotions 
which  can  most  readily  be  aroused  at  the  moment,  and  which 
promise  the  greatest  temporary  advantage.  The  low 
level  of  political  discussion  serves  to  cover  up  the  fact  that 
there  Is,  under  all  these  conflicts,  a  real  intellectual  difference 
between  the  initial  assumptions  of  the  conflicting  theories. 
This  is  not  of  course  realized  by  the  considerable  fraction 
of  any  population  which  Is  born  fully  endowed  with  politi- 
cal and  religious  convictions,  for  with  people  of  this  type 
accident  of  birth  determines  whether  they  are  free  traders 
or  protectionists,  individualists  or  socialists,  Methodists  or 
Mormons.  But  with  all  other  people,  who  arrive  at  con- 
clusions after  more  or  less  definite  reasoning,  the  choice  be- 
tween conflicting  political  theories  on  any  point  is,  after  all, 
made  as  a  consequence  of  a  choice  between  certain  alterna- 
tive basal  assumptions.  The  fact  that  these  basal  assump- 
tions are  rarely  or  never  put  into  words  does  not  affect  the 
validity  of  this  statement,  for  It  will  be  seen  that  once  the 
initial  basis  is  accepted,  the  later  steps  follow  in  natural  and 
necessary  sequence. 

Before  we  go  on,  therefore,  to  discuss  particular  acts  and 
theories  of  government,  we  must  give  at  least  brief  consider- 
ation to  the  ultimate  basal  principles  on  which  such  partic- 
ular theories  or  acts  are  founded.  For  our  present  purposes 
it  will  be  sufficiently  clear  and  exact  to  call  the  two  opposing 
basal  ideas  the  Individualist  and  the  Nationalist  standpoints, 
respectively.  The  theory  and  the  consequences  of  each  of 
these  alternative  standpoints  may  now  be  taken  up  In  turn. 
It  will  be  seen  that  each  is  defensible.  We  may  accept 
either,  but  we  cannot  accept  both;  and  once  accepted,  there 
are  in  each  case  certain  necessary  consequences. 


272  COAL,  IRON  AND  WAR 

The  Individualist  standpoint.  From  the  Individualist 
standpoint,  the  highest  aim  of  government  is  to  assure  abso- 
lute freedom  of  choice  and  action  to  the  individual,  subject 
only  tb  the  provision  that  Infringement  on  the  freedom  of 
others  must  not  be  permitted.  Applied  to  industrial  prob- 
lems, this  Implies  necessarily  that  the  Government  should  be 
entirely  passive,  placing  no  obstacles  whatever  in  the  way  of 
free  movement  and  action  of  money,  of  labor,  or  of  trade. 

Internationally,  this  attitude  Implies  free  trade  In  all  com- 
modities, so  that  ultimately  manufacturers  would  gravitate 
to  the  regions  or  countries  of  cheapest  production.  It  also 
implies  that  capital  should  be  free  to  migrate,  so  as  to  find 
the  country  where  It  could  be  most  profitably  employed  at 
the  moment.  But  It  finally  Implies  that  labor  also  should 
be  free  to  desert  countries  of  low  wages  and  equally  free 
to  enter  countries  on  a  higher  wage  level. 

Internally,  the  Individualist  standpoint  requires  that 
capital  should  be  left  free  to  compete  or  to  combine,  as 
seemed  most  profitable  to  the  Individual  capitalist.  It  also 
implies  that  labor  should  be  equally  free ;  and  that  the  rela- 
tions between  capital  and  labor  should  not  be  interfered 
with  by  the  state.  It  is  opposed  to  state  regulation  of  work- 
ing hours,  even  for  children;  or  of  working  conditions,  even 
in  dangerous  and  unsanitary  occupations. 

Although  Individuahsts  rarely  reaUze  It,  their  basal  Ideas 
necessitate  the  possession  of  certain  quasi-religious  beliefs, 
in  which  they  do  not  differ  greatly  from  Socialists.  Either 
doctrine,  pushed  to  its  logical  conclusion,  implies  a  strong 
belief  in  the  perfection  or  perfectablllty  of  human  nature, 
and  in  the  maintenance  of  International  peace. 

The  Nationalist  standpoint.  From  the  Nationalist  stand- 
point the  highest  aim  of  the  Government  is  to  secure  the 
safety  and  happiness  of  the  community  as  a  whole,  Infring- 
ing as  little  as  possible  on  the  freedom  of  the  Individual  in 
so  doing.  Applied  to  Industrial  problems,  this  Implies  that 
the  Government  may  take  an  active  part  in  furthering  trade. 


LEGISLATIVE  HELPS  AND  HINDRANCES       273 

in  settling  or  preventing  labor  troubles,  and  in  preventing 
monopoly. 

Internationally,  this  attitude  implies  that  protection  may 
be  adopted,  for  one  or  many  industries,  if  the  interest  of 
the  whole  nation  seems  to  justify  an  attempt  to  create  or 
foster  such  industries.  It  implies  also  that  limitations  may 
be  imposed  upon  immigration,  should  such  immigration 
threaten  to  bring  about  undesirable  working  or  living  con- 
ditions for  the  citizens  of  the  nation. 

Internally,  Nationalism  imphes  that  the  test  in  all  ques- 
tions is  whether  or  not  the  proposed  action  will  make  for 
national  security  and  general  interest.  Combinations  of 
labor  or  capital  may  be  permitted,  but  regulated  in  one  way 
or  another  if  they  approach  monopoly  power.  Working 
hours  and  working  conditions  may  be  regulated  by  law,  be- 
cause evils  in  this  regard  will  weaken  the  state  ultimately. 

As  to  its  other  implications.  Nationalism  accepts  human- 
ity as  it  is,  with  the  hope  that  it  may  improve,  but  with  the 
certainty  that  the  state  can  not  wait  until  such  improvement 
takes  place.  Nationalism  is  also  willing  to  accept  the  hope 
that  in  future  wars  may  cease,  but  it  is  not  willing  to  risk 
the  safety  of  the  state  on  the  fulfillment  of  this  hope. 

The  choice  of  position.  As  between  the  two  standpoints 
which  have  just  been  summarized,  the  choice  must  be  made 
with  clear  knowledge  of  the  fact  that  we  are  living  in  a  real 
world,  made  up  of  different  nations,  inhabited  by  peoples  of 
varying  degrees  of  intelligence,  education  and  moral  stand- 
ards. This  recognition  causes  some  consideration  of  the 
forms  which  the  two  rival  theories  of  state  life  may  take 
when  accepted  by  different  national  types  or  classes. 

Individualism,  it  can  be  seen,  would  in  a  perfect  society 
develop  along  lines  unexpected  by  its  earlier  adherents,  and 
in  such  a  society  might  take  the  final  form  of  a  very  happy 
socialism.  With  people  of  more  normal  type  it  would,  on 
the  contrary,  be  more  likely  to  end  in  savagery.  For,  if 
we  admit  that  questions  as  between  two  competitors,  or  two 


274  COAL,  IRON  AND  WAR 

social  classes,  are  to  be  settled  by  struggle,  unregulated  by 
the  state,  we  have  admitted  all  the  requirements  of  the 
syndicalist. 

Nationalism,  on  the  other  hand,  has  also  its  dangers  if 
carried  to  extremes.  For  we  may  easily  go  past  the  point 
of  having  a  natural  pride  in  our  own  country  to  the  foolish 
point  of  believing  that  we  can  best  live  entirely  isolated; 
and  down  that  path  we  can  go  to  the  end  where  lay  old 
China.  Or,  filled  with  the  missionary  spirit,  we  might  de- 
cide to  force  other  countries  to  acknowledge  our  excellence, 
and  down  that  path  we  can  go  to  the  end  where  lies  Ger- 
many. 

In  a  later  chapter  we  may  take  up  again  the  progress  of 
political  ideas,  in  their  effects  on  future  world  leadership. 
Here,  having  discussed  the  basal  ideas  on  which  current 
political  theories  depend,  we  may  turn  to  consideration  of 
the  ways  in  which  different  countries,  at  different  times,  have 
applied  these  theories  in  dealing  with  the  progress  of 
modern  industry.  It  will  be  seen  that  the  three  leading 
industrial  countries  have  approached  these  problems  from 
widely  different  standpoints,  and  with  widely  different  prac- 
tice as  regards  many  important  points. 

Government  policies;  Great  Britain.  In  Great  Britain, 
after  the  close  of  the  Napoleonic  wars,  industrialism  re- 
ceived a  fresh  impulse  toward  development,  and  this  in 
turn  reacted  on  political  relations.  A  slow  but  steady 
growth  of  agitation  for  reform  can  be  noted  from  1815  on- 
ward —  of  reform  both  in  purely  political  and  in  fiscal 
matters.  Meeting  with  little  success  until  1830,  the  next 
few  years  found  the  first  reform  movement  in  command  of 
the  field.  Between  1830  and  1835  Great  Britain  broad- 
ened and  purified  the  electoral  franchise,  abolished  slavery 
in  the  colonies,  passed  the  first  laws  regulating  child  labor 
in  mills,  and  made  the  first  general  appropriation  for  state 
education.  With  the  intervention  of  a  brief  period  of  re- 
action or  rather  delay,  the  movement  took  fresh  life  in  the 


LEGISLATIVE  HELPS  AND  HINDRANCES       275 

years  1 842-1 846,  which  were  marked  by  the  adoption  of 
the  income  tax  as  a  really  permanent  feature  of  British 
fiscal  poHcy,  and  by  the  adoption  of  the  policy  of  free  trade. 

During  the  sixty  years  following  this  gain  little  progress 
was  made  in  the  way  of  new  legislation,  though  fresh  prob- 
lems were  being  accumulated  by  the  steady  growth  of  the 
industries.  There  was  during  this  period,  in  theory  at  least, 
a  certain  tendency  toward  a  reaction  to  individualistic  ideas. 
It  was  felt  that  the  less  of  Government  intervention  the 
better,  and  English  parties  separated  on  foreign  policy,  on 
church  matters,  or  on  Irish  questions,  rather  than  on  indus- 
trial policies.  In  the  meantime  the  courts  had  taken  posi- 
tions which  gradually  defined  the  attitude  of  Great  Britain 
toward  combinations  —  an  attitude  which  differs  from  both 
those  of  Germany  and  the  United  States.  Essentially  it 
consists  in  holding  that  though  business  competition  must 
be  fair,  it  may  be  legally  carried  to  its  logical  extreme  of 
killing  the  competitive  trade ;  and  that  though  combinations 
have  no  direct  legal  sanction,  they  are  not  necessarily  sub- 
ject to  legal  penalty.  Thi's  general  attitude  of  laissez  faire 
corresponds  fairly  well  to  the  position  taken  by  the  United 
States  prior  to  the  passage  of  the  Sherman  Act. 

After  the  close  of  the  Transvaal  war,  an  entirely  fresh 
Liberal  program  was  offered  to  the  British  public.  Re- 
form in  many  different  directions  was  promised,  and  since 
the  accession  of  its  supporters  to  office  most  of  these  prom- 
ises have  been  carried  out.  It  is  still  too  early  to  hazard 
a  conjecture  as  to  the  ultimate  effect  of  these  very  radical 
changes  in  English  policy.  Most  of  them  were  undoubtedly 
urgently  needed  if  Great  Britain  was  to  secure  a  reasonably 
contented  working  population,  on  which  her  very  existence 
as  a  nation  depends.  On  the  other  hand  popular  reforms, 
under  universal  suffrage,  can  rarely  be  expected  to  stop  at 
a  reasonable  point. 

As  to  direct  help  in  the  past,  Great  Britain  has  been  on  a 
strictly  free-trade  basis  for  many  years,  though  all  of  her 


276  COAL,  IRON  AND  WAR 

larger  industries  were  founded  under  a  protectionist  regime. 
Practically  all  the  Dominions  have  adopted  protective  tariffs 
and  in  some  cases  direct  bounties.  Before  the  World  War 
there  was  the  commencement  of  renewed  agitation  for  pro- 
tection in  the  home  country  itself,  and  it  seems  certain  that 
one  of  the  main  effects  of  the  war  will  be  the  adoption  of 
that  policy  by  Great  Britain. 

As  to  corporation  control,  a  fairly  strict  Companies  Act, 
aided  by  the  very  rigid  enforcement  of  laws  regarding 
company  management,  promotions  and  unfair  competition, 
has  been  of  service  in  preventing  some  of  the  normal  feat- 
ures of  unregulated  corporation  growth. 

The  Government  attitude  toward  combinations,  for  over 
half  a  century,  has  been  at  least  not  hostile.  The  courts 
have  taken  increasingly  broad  views  as  to  the  type  of  agree- 
ments that  can  be  considered  legal;  and  while  mergers  and 
consolidations  have  accordingly  not  been  carried  out  to  the 
extent  shown  in  the  United  States,  more  or  less  formal  pools 
and  price  agreements  seem  to  be  in  force  in  every  important 
British  industry. 

Government  policies;  Germany.  The  German  Govern- 
ment, whether  old  Empire  or  new  Republic,  has  never  taken 
the  comparatively  passive  attitude  toward  Industrial  devel- 
opment that  was  long  so  characteristic  In  Great  Britain,  but 
has  on  the  contrary  actively  assisted  In  such  growth. 

As  regards  the  form  and  control  of  the  business  unit, 
strict  supervision  is  maintained  over  incorporation,  while 
rigid  enforcement  of  other  laws  tends  to  prevent  unfair 
methods  of  competition.  In  opposition  to  the  English  com- 
mon law  attitude,  the  German  courts  hold  that  contracts 
in  restraint  of  trade  are  enforceable  If  the  particular  con- 
tract does  not  tend  to  injure  the  state.  The  result  of  this 
is  that  relatively  few  mergers  or  consolidations  occur  in 
Germany,  most  industries  being  held  together  by  cartels  or 
trade  agreements,  in  which  the  Government  itself  is  fre- 


LEGISLATIVE  HELPS  AND  HINDRANCES       277 

quently  a  member.  This  Is  particularly  the  case  with  re- 
gard to  coal  trade  cartels,  which  the  Prussian  and  other  state 
governments  enter  as  owners  of  operating  coal  mines. 

In  Germany  the  movements  toward  Industrial  and  social 
reform  took  rather  unexpected  forms,  since  they  were  con- 
sidered by  Bismarck  as  simply  necessary  factors  In  a  more 
important  work.  The  whole  matter  Illustrates  well  both 
the  advantages  and  disadvantages  which  a  modern  state  re- 
ceives from  the  long-continued  control  of  a  single  great  man. 
To  the  Chancellor,  the  national  unity  of  Germany  and  its 
maintenance  against  foreign  aggression  were  the  only  things 
worth  considering;  and  it  was  further  Implied  that  this 
unity  must  be  maintained  under  the  almost  absolute  rule  of 
the  house  of  Hohenzollern.  The  aims  were  clear  and  dis- 
tinct, and  they  were  carried  out  in  a  way  which,  on  the 
whole,  did  well  for  the  nation  at  large.  But  in  order  that 
these  aims  might  be  accomplished  in  a  modern  state,  it  is 
obviously  necessary  that  the  mass  of  the  population  must  be 
contented  and  prosperous,  this  being  particularly  a  necessity 
in  a  country  whose  defense,  thanks  to  the  absence  of  natur- 
ally protected  frontiers,  requires  a  large  army. 

All  industrial,  social  and  political  problems  were  con- 
sistently treated  from  the  point  of  view  which  has  just  been 
briefly  outlined.  Socialism  was  to  be  discouraged  and  re- 
pressed, as  tending  to  weaken  Germany  against  external 
aggression,  but  the  complaints  which  had  given  rise  to  social- 
ism were  to  be  met  by  remedial  action.  Manufactures  were 
to  be  encouraged  in  every  possible  way  not  only  because  of 
their  direct  influence  on  the  wealth  and  prosperity  of  the 
country,  but  because  they  were  the  only  means  by  which  a 
large  population  could  be  maintained  within  the  limits  of 
Germany.  To  this  end  protective  tariffs  were  adopted,  the 
export  trade  was  directly  encouraged  and  trade  agreements 
and  combinations  were  made  not  only  legal  but  oflicial.  On 
the  other  hand,  the  laborer  was  to  be  protected  against  the 


278  COAL,  IRON  AND  WAR 

hardships  of  modern  industry,  which  implied  strongly  pa- 
ternal attitude  so  far  as  education,  old  age  pensions  and  risk 
insurance  were  concerned. 

This  policy,  first  definitely  adopted  by  Bismarck  after  his 
final  break  with  the  Conservatives,  in  1878,  was  followed 
consistently  by  his  successors;  and  the  result  is  modern  in- 
dustrial Germany.  Lawyers  and  politicians  may  criticize 
the  policy  —  but  the  efficiency  of  the  final  product  can  be 
judged  fairly  only  by  its  competitors  in  war  trade  and  indus- 
try. From  that  point  of  view  we  may  admit  that  the  work 
of  German  reconstruction  was  painfully  sound  and  complete. 

Government  policies;  United  States.  The  history  of  the 
United  States  up  to  the  time  of  the  Civil  War,  is  merely 
the  story  of  attempts  to  make  a  group  of  machines  run 
steadily  and  uniformly  without  any  central  source  of  power 
or  regulation.  The  attempt  was  finally  abandoned  in  1861, 
in  practice  if  not  in  theory,  and  since  that  date  no  party 
has  shown  any  serious  interest  in  reviving  the  experiment. 
Of  the  two  groups  of  States  which  entered  that  war,  both 
emerged  as  centralized  governments  —  and  the  one  whose 
basic  theory  was  State's  rights  was  the  more  absolute  and 
centralized  of  the  two.  The  effect  of  the  earlier  theory 
was  to  give  a  series  of  contemporaneous  policies  with  regard 
to  public  questions,  rather  than  one  general  trend.  Since 
the  war  these  differences  have  gradually  disappeared,  and 
from  now  on  we  may  fairly  expect  that  in  the  broader  treat- 
ment of  industrial  and  social  problems  there  will  be  some 
approach  to  unity  throughout  the  United  States. 

The  conditions  which  have  been  outlined  In  the  preceding 
paragraph  make  it  difficult  to  summarize  adequately  the 
general  trend  of  development  which  industrial  policies  have 
followed  In  this  country.  W^Ith  regard  to  the  questions  of 
protection  and  free  trade  we  may  say  that  In  general  the 
policy  of  protection  has  been  adopted,  though  there  have 
been  several  reversals  of  more  or  less  temporary  nature. 
It  Is  probably,  however,  too  early  in  the  history  of  American 


LEGISLATIVE  HELPS  AND  HINDRANCES       279 

development  to  assume  that  free  trade  will  now  be  adopted 
as  a  general  and  continuous  policy. 

During  the  earlier  periods  of  American  development 
there  seems  to  have  been  a  predominant  feeling  that  indus- 
trial growth  should  be  encouraged  both  directly  and  in- 
directly; and  little  effort  was  made  to  hinder  the  progress 
of  integration  and  combination.  About  twenty  years  ago, 
however,  a  marked  reversal  of  public  sentiment  in  this  re- 
gard seemed  to  be  in  progress;  and  in  the  period  since  then 
we  have  had  much  destructive  criticism  and  few  constructive 
suggestions.  Prior  to  the  passage  of  the  Sherman  Act, 
combinations  had  no  legal  sanction;  since  its  passage  they 
have  been  legally  penalized.  The  Act  was  somewhat  in- 
definite in  its  real  bearing,  the  offenses  defined  have  not 
been  generally  considered  morally  wrong,  and  its  general 
effect  has  hitherto  been  somewhat  indecisive.  With  a 
clearer  interpretation  and  rigid  enforcement  it  will  become 
a  decisive  factor  in  American  industrial  development  or  re- 
trogression. 

One  question  requires  more  consideration,  for  the  re- 
lation of  the  Government  to  market  control  has  been  both 
important  and  variable.  Four  dates  seem  to  mark  out 
different  periods  in  the  history  of  this  matter.  These  are 
1890,  when  the  Sherman  Act  was  passed;  1894,  the  deci- 
sion in  the  Knight  case;  1899,  the  passage  of  the  revised 
General  Corporation  Act  of  New  Jersey;  and  1904,  the  de- 
cision in  the  Northern  Securities  case.  The  more  recent 
decisions  in  the  Standard  Oil  and  American  Tobacco  cases, 
though  widely  discussed,  do  not  seem  to  have  materially 
changed  the  situation. 

Prior  to  the  passage  of  the  Sherman  Act,  pools  and  other 
loose  and  temporary  forms  of  price-making  agreements 
were  in  common  use  in  all  industries.  When  cases  involv- 
ing them  came  up  for  decision,  the  courts,  following  the 
common  law,  steadily  held  that  such  agreements  were  un- 
enforceable.    This  tended  to  weaken  their  efliciency,  but 


28o  COAL,  IRON  AND  WAR 

hardly  restrained  their  formation.  The  Sherman  Act,  how- 
ever, put  the  matter  on  a  different  footing,  by  making 
such  agreements  criminal  in  place  of  being  merely  extra- 
legal; and  from  1890  on  other  forms  of  combination  be- 
came more  prominent.  The  decision  in  the  Knight  case 
seemed  to  suggest  one  way  out  of  the  difficulty,  and  the 
passage  of  the  New  Jersey  General  Corporation  Act  in  1899 
made  it  possible,  for  the  first  time,  to  form  a  holding  com- 
pany under  general  statutes.  Until  the  Northern  Securities 
case  was  decided,  in  1904,  the  situation  seemed  to  have 
been  cleared.  That  decision,  however,  again  Involved  the 
question  In  doubt,  from  which  the  country  has  not  yet 
emerged.  The  several  cases  later  decided  have  not,  con- 
trary to  a  somewhat  general  Impression,  thrown  much  light 
upon  the  really  Important  questions  at  Issue,  for  these  recent 
cases  were  not  simple  but  complex.  They  involved  not 
only  consideration  of  the  general  question  of  combination, 
but  the  specific  Instances  In  which  unfair  practices  in  compe- 
tition were  charged.  Under  these  circumstances  the  deci- 
sions reached  can  not  be  accepted  as  applying  necessarily 
to  corporations  of  large  size  but  with  clear  records  so  far 
as  criminal  acts  or  intentions  are  concerned. 


PART  IV 
THE  FUTURE  OF  INDUSTRIALISM 


CHAPTER  XXI 

THE  NATURE  OF  THE  PROBLEM 

In  the  first  part  of  this  volume  we  were  able  to  follow  out 
the  growth  of  modern  industrialism  from  the  time  of  Its 
Inception  In  England,  about  1770,  to  its  condition  in  the 
leading  Industrial  nations  at  the  close  of  the  World  War. 
Following  that  historical  study  of  the  matter,  examination 
of  the  material  bases  and  resources  upon  which  our  modern 
machine  civilization  rests  threw  light  upon  the  extent  and 
unequal  distribution  of  these  resources,  and  upon  the  extent 
to  which  they  have  aided  or  limited  the  industrial  growth 
of  different  nations.  In  still  later  chapters  there  was  discus- 
sion of  the  varying  rate  at  which  Industrial  growth  has 
taken  place  at  different  periods  in  our  history,  and  of  the 
factors  which  seem  to  have  been  most  influential  in  inciting 
particularly  rapid  growth  at  certain  times.  Among  these, 
we  found  that  access  to  new  markets,  often  appearing  in 
consequence  of  geographic  discovery,  of  colonization  or  of 
transport  Improvements,  was  perhaps  the  most  Important 
single  factor  In  commencing  such  periods  of  world-wide  com- 
mercial and  Industrial  activity.  The  technical  progress 
made  In  Industry,  which  has  resulted  in  vast  improvement 
in  the  physical  well-being  of  all  the  world,  was  also  found 
to  be  not  constant,  but  spasmodic  or  rhythmic  in  its  occur- 
rence, and  to  depend  in  large  part  upon  the  general  activity 
of  Industry  itself.  Certain  other  factors  which  have  aided 
Industrial  expansion,  such  as  population  Increase  and  gold 
supplies,  were  examined,  with  varying  effect.  Finally,  at- 
tention was  paid  to  the  form  taken  by  the  industrial  organ- 
Ism  Itself,  as  a  natural  consequence  of  growth,  and  to  the 
manner  in  which  both  this  organic  form  and  the  extent  of 

283 


284  COAL,  IRON  AND  WAR 

industrial  growth  had  been  affected  by  political  theories  and 
practice. 

Throughout  all  of  this  study  there  has  been  an  attempt 
to  avoid  purely  local  treatment,  so  that  national  bias  may 
be  avoided,  and  the  results  obtained  be  general  in  their 
validity  and  application.  In  doing  this,  it  has  been  found 
possible  to  discuss  the  general  subject  of  industrial  growth 
without  laying  undue  stress  upon  the  effects  of  particular 
government  policies,  or  the  work  of  individual  men,  in  either 
aiding  or  retarding  such  growth.  The  development  which 
has  come  to  pass  in  many  countries  is  found  to  be  natural 
in  its  origin  and  in  its  effects,  and  to  show  little  trace  at  any 
stage  of  conscious  human  planning  or  intention.  Business 
units,  industries,  and  industrial  conditions  —  all  of  these 
have  grown  up,  in  different  countries,  along  much  the  same 
general  lines  of  development.  The  causes  which  incite  this 
development  are  widespread,  so  that  all  the  world  exhibits 
the  same  tendencies.  But  inequality  in  natural  resources 
has  operated  to  favor  growth  in  some  regions,  and  to  re- 
tard or  actually  prevent  it  in  othei^;^Vhile  the  rate  at  which 
development  takes  place  is  anecte'd^to  some  extent  by  con- 
sci'ous  human  action. 

Having  thus  established  certain  factors  which  have  caused, 
aided  and  limited  industrial  progress  in  the  past,  it  should 
be  possible  to  apply  the  same  rriethod  of  study  to  the  prob- 
lems of  the  present  and  of  the  immediate  future.  Since 
our  conclusions  have  been  reached  by  study  of  accumulated 
historical  fact,  they  should  have  a  validity  greater  than  if 
they  had  been  derived  by  deduction  from  a  pre-conceived 
theory.  And  since  the  facts  so  utilized  have  not  been 
limited  to  those  shown  by  the  history  of  a  single  race  or 
nation,  the  conclusions  should  be  applicable  even  to  the 
entirely  new  arrangement  of  nationalities  which  the  world 
has  now  to  face. 

We  are  interested  in  reaching  some  just  conclusion  as  to 
the  probable  course  of  national  and  international  progress 


THE  NATURE  OF  THE  PROBLEM  285 

during  the  decades  Immediately  ahead,  with  particular  refer- 
ence to  the  course  of  Industrial  development  during  that 
period.  But  we  see,  as  soon  as  we  recall  the  factors  which 
have  Influenced  Industrial  progress  In  the  past,  that  any  fore- 
cast based  solely  upon  the  condition  of  Industry  Itself  would 
be  of  little  service.  In  order  to  secure  results  of  any  real 
value  the  scope  of  the  Inquiry  must  be  widened  so  as  to  In- 
clude some  consideration  at  least  of  the  probable  course  of 
political  development  In  the  competing  Industrial  nations, 
for  this  will  influence  very  markedly  Indeed  their  industrial 
growth.  And  we  must  also  take  Into  account  the  possibility, 
or  probability,  that  another  war  of  wide  scope  may  intervene 
to  wreck  our  calculations.  Aside  from  these  external  fac- 
tors, we  must  of  course  pay  still  more  attention  to  those 
which  arise  from  industry  Itself,  and  from  the  natural  con- 
ditions which  Incite  and  limit  development. 

At  the  outset,  we  must  recognize  very  clearly  that  the 
problem  of  future  Industrial  development  and  future  rivalry 
Is  not  merely  a  continuation,  after  a  five  year  break,  of  the 
problem  which  existed  In  19 14.  It  would  simplify  matters 
greatly  If  we  could  assume  that  this  were  so,  and  that  the 
world  of  to-day  Is  merely  a  little  older  than  the  world  of 
before  the  war.  But  such  a  simple  conclusion  would  be 
most  widely  at  variance  with  the  truth,  and  Its  acceptance 
could  only  lead  to  disaster. 

When  we  come  to  consider  either  national  development 
or  International  rivalry,  In  trade  or  otherwise,  we  could 
therefore  commit  a  profound  error  by  assuming  that  In 
either  case  the  old  conditions  still  exist.  We  have  In  truth 
to  deal  with  a  new  world,  not  new  in  the  sense  that  there 
has  been  any  profound  mental  or  moral  uplift,  as  Idealists 
hope,  but  new  In  the  sense  that  all  material  conditions  have 
been  subject  to  change  and  rearrangement,  that  the  social 
and  Industrial  structure  has  been  badly  shaken  everywhere, 
and  that  In  some  great  nations  these  structures  have  been 
practically   shattered.     Under   such  conditions  new  ideas 


286  COAL,  IRON  AND  WAR 

will   arise,    and   these   must   be   taken    into   consideration. 

It  will  suffice,  for  our  present  needs,  to  outline  briefly 
the  nature  of  some  of  the  new  factors  which  must  be  taken 
into  account,  and  which  will  in  later  chapters  be  discussed 
in  more  detail.  There  is  the  fact,  first  of  all,  that  we  have 
now  a  very  poor  world,  as  compared  with  that  of  before  the 
war.  The  destruction  of  real  wealth,  in  human  lives  and 
material  property,  has  been  great  beyond  anything  ever  ] 
before  seen  or  anticipated.  Later  we  shall  attempt  to  come 
to  some  estimate  of  what  this  destruction  amounts  to,  and 
also  as  to  what  it  implies  in  the  way  of  social  and  industrial 
changes.  Second,  we  have  the  fact  that  not  only  the  three 
leading  industrial  nations,  but  several  weaker  European  coun- 
tries are  loaded  down  with  government  debts  to  an  extent 
entirely  unprecedented.  This  condition  can  not  be  passed 
over  with  the  mere  statement  that  these  government  debts 
will  ultimately  be  carried  as  individual  debts  of  the  citizens, 
and  that  they  are  even  now  equalized  by  individual  owner- 
ship of  the  government  securities  which  were  issued  against 
them.  That  statement  is  true  enough,  so  far  as  it  goes, 
but  it  does  not  touch  the  real  crux  of  the  matter.  It  is  true 
that  the  government  debts  will  finally  be  taken  up  by  means 
of  taxes,  capital  levies  or  frank  repudiation  —  for  all  of 
which  there  is  ample  warrant,  even  in  our  own  history. 
But  in  this  process,  the  methods  employed  will  operate  to 
cause  friction  between  classes,  and  re-distribution  of  indi- 
vidual wealth,  to  an  extent  which  will  certainly  produce 
marked  industrial  and  perhaps  political  effects. 

Further  than  these  two  broad  changes  which  have  been 
brought  about  by  the  war,  we  have  the  facts  that  many  new 
little  nations  have  been  created,  and  several  old  ones  dis- 
membered, temporarily  at  least.  And  in  the  course  of  these 
territorial  and  racial  rearrangements,  there  have  been  inci- 
dental but  far  more  important  changes  in  the  national  con- 
trol of  various  important  resources  —  coal,  iron  ore,  petro- 
leum.    These  changes  have  been  far  greater  than  appears 


THE  NATURE  OF  THE  PROBLEM  287 

to  be  commonly  realized,  to  the  extent  that  some  of  them 
will  affect  profoundly  the  course  of  the  world's  history, 
poHtical  as  well  as  industrial. 

There  are,  finally,  certain  features  of  recent  industrial 
growth  which  seems  to  suggest  that  in  the  near  future  there 
will  be  marked  changes  in  both  the  rate  and  trend  of  de- 
velopment. Such  changes  would  affect  not  only  our  indus- 
trial structure  but  also  our  existing  social  arrangements,  and 
are  therefore  worthy  of  careful  study,  even  though  the  final 
results  of  such  study  may  be  suggestive  rather  than  con- 
clusive. 

Taking  all  of  these  important  factors  into  consideration, 
it  is  evident  that  in  order  to  arrive  at  conclusions  of  real 
value,  we  must  weigh  in  turn  each  class  of  facts  likely  to 
affect  the  result,  and  then  attempt  a  synthesis  of  these  par- 
tial conclusions.  For  the  sake  of  clearness  in  presentation 
this  will  be  done  by  taking  up  the  different  subjects  in  the 
following  order,  making  up  the  remaining  chapters  of  this 
volume : 

Chapter    XXII     The  progress  of  political  beliefs. 

Chapter  XXIII     The  trend  and  rate  of  future  growth. 

Chapter  XXIV     The  factors  of  world  competition. 

Chapter     XXV     The  future  of  world  competition. 

Chapter  XXVI     Industrialism  and  war. 
To  which  will  be  added,  as  a  brief  summary  of  the  ap- 
parent trend  of  development  politically  and  industrially 
Chapter  XXVII     The  forms  of  future  progress. 


CHAPTER  XXII 

THE  PROGRESS  OF  POLITICAL  BELIEFS 

As  with  advances  In  other  departments  of  human  thought 
and  activity,  men's  notions  concerning  the  proper  form  of 
government,  and  the  necessary  or  permissible  scope  of  state 
activities,  show  a  certain  rhythmical  progress.  The  ad- 
vance is  not  persistent,  but  is  subject  to  periods  of  inactivity, 
or  even  of  more  or  less  serious  reaction;  the  direction  of 
the  advance  is  not  always  immediately  obvious,  so  that  look- 
ing back  over  a  long  period  we  can  see  that  the  development 
ultimately  took  a  course  differing  somewhat  markedly  from 
the  direction  of  the  separate  movements  which,  at  different 
times,  seemed  to  be  in  the  ascendency.  A  new  school  of 
thought  arises  gradually,  offering  a  new  theory  or  advocat- 
ing a  new  program;  its  influence  increases  until  It  seems 
to  dominate  its  sphere  of  knowledge  or  action  completely; 
and  It  effects  advances  in  legal  and  social  practice  along 
certain  definite  lines.  But  even  while  this  is  happening  we 
find  that  real  conditions  have  changed  more  rapidly  than 
human  thought,  and  that  by  the  time  the  new  program 
IS  generally  accepted  it  Is  seen  to  have  lagged  behind  the 
development  of  external  conditions,  and  to  be  antiquated 
as  compared  with  Its  existing  environment.  Progress  has 
been  made.  It  Is  true;  but  unexpected  defects  in  the  pro- 
gram have  developed,  and  unsuspected  forces  have  been 
at  work,  and  the  gain  has  not  been  as  definite  and  final  as 
had  been  hoped.  So  the  search  for  an  ultimate  formula 
recommences,  and  naturally  first  shows  Itself  In  a  violent 
reaction  from  those  portions  of  the  generally  accepted 
theory  which  have  proven  most  obviously  unfitted  to  existing 
conditions.     Looking  back  over  a  series  of  such  advances, 


THE  PROGRESS  OF  POLITICAL  BELIEFS       289 

the  whole  course  resembles  the  path  of  a  vessel  tacking  in 
order  to  gain  some  desired  point.  Each  leg  of  the  course 
diverges  violently  from  the  preceding  one;  each  involves 
some  loss  of  distance  laterally;  but  taken  together  there 
is  a  general  and  sustained  advance  toward  the  goal.  In 
adapting  this  comparison  to  the  progress  of  thought  and 
legislation  on  economics  and  political  questions  we  must 
add  to  it  the  qualification  that  there  come,  at  intervals,  long 
periods  of  relative  calm,  when  neither  activity  nor  progress 
are  noticeable,  and  that  these  alternate  with  periods  of  in- 
tense activity  culminating  in  rapid  advance.  These  alter- 
nating periods  of  quiet  and  advance  have  a  curious  and  im- 
portant effect  upon  the  relation  of  current  theory  to  actual 
fact.  For,  since  it  requires  ordinarily  at  least  a  generation 
to  permit  the  general  adoption  of  a  new  theory  or  pro- 
gram, it  is  only  during  one  of  the  long  periods  of  calm 
that  we  find  accepted  theories  to  be  fairly  in  accord  with 
existing  conditions.  It  is  only  when  external  conditions 
have  been  comparatively  unchanged  for  a  long  period  of 
time  that  current  views  are  in  accord  with  them.  During 
periods  of  rapid  change  there  is  a  marked  discordance  be- 
tween theories  and  facts;  for  the  normal  condition  is  that 
the  generation  trained  to  accept  one  view  will  hold  to  it 
long  after  the  conditions  which  justified  it  have  passed 
away. 

Every  nation  has  attained  its  present  stage  of  political 
and  industrial  development  in  purely  natural  fashion,  and 
the  extent  and  form  of  such  development  has  in  each  case 
been  determined  largely  by  natural  conditions,  and  but 
little  by  conscious  intentional  direction.  It  would  therefore 
be  a  serious  error  to  attempt  to  force  existing  stages  of 
civilization  into  conformity  with  some  pre-determined 
Theory  of  the  State,  or  to  try  to  bend  existing  commercial 
conditions  to  fit  a  pre-determined  Theory  of  Trade.  On 
the  other  hand,  it  will  be  well  to  avoid  falling  into  the  op- 
posite error  of  entirely  disregarding  the  effect  of  law  and 


290  COAL,  IRON  AND  WAR 

theory  upon  the  form  which  institutions  have  assumed  at 
different  periods  and  in  different  countries.  Theory  has  in 
the  past  exercised  a  powerful  though  not  a  decisive  influ- 
ence upon  the  course  of  development;  and  it  is  with  one 
such  instance  of  the  reaction  between  theory  and  fact  that 
we  have  now  to  deal. 

The  passing  of  individualism.  Sixty  years  ago  it  was  still 
possible  for  the  keenest  of  thinkers  to  accept  a  purely  individ- 
uahstic  conception  of  government,  as  opposed  to  state  regu- 
lation or  intervention.  Applied  by  Adam  Smith  during  the 
latter  part  of  the  eighteenth  century  to  purely  economic 
problems,  the  idea  of  Government  non-interference  was  ex- 
tended by  Mill  and  Spencer  to  purely  political  matters. 
The  names  of  the  advocates  of  this  theory  are  still  of 
influence,  but  it  would  be  foolish  to  permit  admiration  to 
pass  into  fetichism.  A  great  philosopher  would  certainly  be 
the  first  to  remind  us  that  governmental  institutions  must 
be  suited  to  their  environments,  or  else  perish;  and  that 
change  in  external  conditions  must  of  necessity  involve  cor- 
responding change  in  political  institutions.  For  in  this  one 
great  respect  political  evolution  differs  from  purely  physical 
evolution  —  in  that  through  the  medium  of  laws  it  may 
to  some  extent  be  directed  in  advance  toward  the  realization 
of  an  ideal.  This  possibility  must  be  borne  in  mind,  even 
though  we  admit  that  uncontrollable  developments  will 
operate  to  reduce  the  extent  to  which  such  intelligent  direc- 
tion of  political  evolution  is  possible. 

In  considering  the  influence  which  the  individualistic 
theory  has  exerted  over  our  past  practice,  it  will  be  well 
to  recall  that  in  its  most  striking  form  that  theory  dates 
beyond  the  middle  of  the  last  century.  Its  justification 
at  that  time  may  be  better  comprehended  if  we  briefly  sum- 
marize some  of  the  conditions  which  gave  it  birth.  The 
English  theorists  of  that  period  had  to  deal  with  conditions 
which,  at  the  moment  seemed  essentially  fixed.  From 
Waterloo  to  the  Crimean  War  there  was  substantial  peace 


THE  PROGRESS  OF  POLITICAL  BELIEFS       291 

in  Europe,  accompanied  by  a  reaction  toward  absolutism 
on  the  Continent  and  by  extensive  industrial  development 
In  Great  Britain  and  America.  The  contrasts  which  could 
then  be  drawn  seemed  to  point  to  a  very  obvious  conclusion 
—  that  the  more  a  Government  Interfered  with  Its  citizens, 
the  less  there  was  of  substantial  justice  and  freedom  and 
prosperity.  Both  ethical  and  material  arguments  appeared 
to  justify  this  conclusion.;  and  it  was  accordingly  embodied 
In  a  Theory  of  the  State  which  gave  it  definite  form.  It 
was  assumed  that  the  duty  of  the  state  was  limited  In  the 
ideal  government  to  protecting  Its  citizens  against  external 
aggression,  and  to  securing  them  justice  among  themselves. 
As  regards  the  latter  point,  the  complaints  which  then  arose 
were  directed  mainly  against  certain  artificial  restrictions 
on  trade  and  Industry.  Under  these  conditions  It  was  as- 
sumed, fairly  enough,  that  the  duties  of  the  state  were 
largely  negative,  and  that  the  mere  removal  of  artificial 
barriers  would  permit  normal  development  by  the  individ- 
ual. It  was  not  recognized  that  In  the  growing  industrial- 
ism there  was  a  power  at  least  as  forceful  as  in  the  militar- 
ism which  had  apparently  passed  away;  and  that  against 
this  new  power  the  individual  would  be  relatively  defense- 
less. As  Is  usual  with  the  gradual  development  of  great 
movements,  the  world  has  come  to  recognize  these  things 
long  after  the  event.  To  the  men  of  1820,  individualism 
seemed  clearly  indicated  as  the  only  sound  line  of  develop- 
ment; by  the  time  their  theories  had  become  generally  ac- 
cepted, the  possibility  of  any  true  individualism  had  gone 

by. 

What  we  have  to  deal  with  now  are  not  the  conditions 
of  1820,  but  a  vastly  different  state  of  things;  and  what 
we  have  to  consider  Is  how  these  changes  in  conditions,  and 
the  probabilities  as  to  future  developments,  are  to  be  met. 
We  may  talk  as  much  as  we  please  about  the  advantages 
of  Individualism,  of  free  competition,  of  personal  owner- 
ship, and  of  freedom  from  state  control.     Such  talk  will 


292  COAL,  IRON  AND  WAR 

do  no  harm  so  long  as  we  appraise  it  correctly  as  a  merely 
theoretical  admiration  for  certain  conditions  which  once 
were  possible.  But  as  soon  as  we  come  to  deal  with  exist- 
ing facts,  we  find  that  this  general  admiration  can  not  be 
translated  into  action.  The  purely  individualistic  pro- 
gram is  now  impossible  of  execution,  and  the  theory 
which  underlay  it  will  in  time  become  of  merely  historic 
interest.  As  it  passes  from  the  field  it  leaves  revealed  cer- 
tain conditions  and  ideas  which  do  require  consideration. 

The  Program  of  Socialism.  The  practical  defects  of 
the  individualistic  theory  became  obvious  enough  long  ago, 
and  the  first  sharp  reaction  from  it  nationally  took  place  in 
the  opposite  direction  of  collectivism  or  socialism.  This 
gained  strength  and  definiteness  first  in  France  and  Ger- 
many, where  the  burdens  of  the  new  industrial  conditions 
were  heavier  than  in  England  or  America;  but  its  growth 
has  been  steady  and  far  more  rapid  than  is  commonly  sup- 
posed. Its  opponents  are  too  apt  to  overlook  the  fact 
that  socialist  propaganda  has  an  immense  moral  strength, 
appealing  in  striking  form  to  the  better  sentiments  of  hu- 
man nature.  Its  weakness,  indeed,  is  not  ethical  but  practi- 
cal; for  it  offers  very  doubtful  remedies  for  very  actual 
wrongs.  It  can  not  be  effectively  combated  by  denial  that 
the  wrongs  exist,  but  it  might  be  met  by  the  argument  that 
there  are  better  ways  in  which  they  may  be  removed. 

It  is  difficult  to  summarize  adequately,  in  a  few  sentences, 
the  cardinal  doctrines  and  promises  of  socialism;  for  there 
are  wide  differences  of  opinion  among  socialists  themselves 
on  many  points.  Even  casual  observation  will  suggest  that 
the  milk-and-water  socialism  of  intellectual  society  can 
hardly  be  the  same  doctrine  that  inspires  the  syndicalist 
movement  and  its  accompanying  outrages.  But  there  are 
certain  ideas  which  seem  to  be  held  in  common  by  all  who 
consider  themselves  socialists,  and  the  more  important  and 
striking  of  these  generally  accepted  theories  and  hopes  may 
be  briefly  stated  to  advantage  in  the  present  connection. 


THE  PROGRESS  OF  POLITICAL  BELIEFS       293 

The  basal  complaint  of  the  socialist  is  that  the  existing 
private  ownership  of  capital,  land  and  other  means  of  pro- 
duction is  absolutely  and  wholly  unjust,  inequitable,  and 
without  either  ethical  or  historical  warrant.  With  certain 
parts  of  this  statement  many  intelligent  people  may  agree; 
from  others  they  may  dissent  just  as  sharply.  From  the 
socialist  standpoint,  however,  the  abolition  of  private 
ownership  of  such  types  of  property  is  essential  to  a  sound 
and  equitable  condition  of  society.  As  to  whether  there  is 
to  be  compensation  to  existing  owners,  there  appears  to  be 
a  wide  difference  of  opinion  among  socialists  themselves. 
As  to  the  mode  of  acquiring  the  property,  that  too  is  sub- 
ject to  great  differences  of  opinion.  The  syndicalists  be- 
lieve that  private  ownership  may  be  made  so  unpleasant,  un- 
safe and  unprofitable  as  to  be  abandoned,  more  or  less 
voluntarily;  others  appear  to  favor  taxing  it  into  collective 
control. 

After  collective  ownership  has  been  established,  the 
socialist  program  becomes  more  vague,  for  the  real  de- 
fect of  socialistic  theory  is  that  it  has  not  ventured  on  any 
constructive  ideas.  We  are  encouraged  to  believe  that  the 
mass  of  the  population  will  work  hard  enough  to  keep  the 
world  going;  that  there  will  be  more  leisure  for  everyone, 
and  a  far  more  equitable  distribution  of  gains;  and  that 
it  will  be  possible  to  keep  this  collective  state  in  motion 
without  serious  force. 

The  opponents  of  socialism  may  be  divided  into  two 
classes.  One  group  spends  its  time  in  shrieking  that  the 
abolition  of  private  property  is  wicked  —  and  seems  to  ex- 
pect this  plea  to  end  the  matter.  But  most  of  those  who 
oppose  the  socialistic  program  do  so  on  the  grounds  that 
it  does  not  promise  an  effective  mechanism  for  operating 
a  modern  industrial  state;  and  that  there  are  other  and 
preferable  ways  for  redressing  the  wrongs  of  which  social- 
ists complain.  It  seems  clear  enough,  at  any  rate,  that 
socialism  can  not  be  adopted  by  any  single  country,  and  that 


294  COAL,  IRON  AND  WAR 

it  can  not  be  adopted  by  the  civilized  nations  until  all  the 
world  is  brought  up  to  substantially  the  same  stage  of  cul- 
ture, both  mental  and  ethical.  For,  whatever  may  be  its 
other  advantages,  a  socialistic  state  will  not  be  strong  as 
against  external  aggression;  and  until  the  possibilities  of 
such  aggression  have  entirely  disappeared  the  acceptance  of 
socialism  by  a  single  nation  would  simply  mean  national 
suicide. 

It  is  easy  to  state,  and  perhaps  to  over-state,  the  diffi- 
culties which  would  have  to  be  faced  if  a  purely  socialistic 
state  were  to  be  kept  in  operation.  It  must  be  understood, 
however,  that  in  the  present  condition  of  society  un- 
restrained individualism  would  bring  about  still  more 
serious  difficulties.  As  a  mean  between  these  two  extremes, 
all  modern  nations  have  adopted,  to  a  greater  or  lesser  de- 
gree some  policy  of  state  regulation. 

The  growth  of  regulation.  Along  certain  lines  pro- 
gress has  been  made  to  a  degree  which  is  recognized  as 
astonishing,  when  compared  with  quite  recent  conditions. 
To-day,  for  example,  no  one  seriously  argues  that  the  state 
has  no  right  to  offer  the  possibility  of  free  education  to  all 
children;  but  only  a  quarter  century  ago  this  was  still  held 
to  be  an  infringement  of  private  liberty  by  the  English  in- 
dividualists. To-day  no  one  seriously  maintains  that  the 
state  has  no  right  to  prevent  the  spread  of  contagious 
diseases,  yet  within  the  recent  past  this  too  was  looked  upon 
as  a  trespass  on  the  rights  of  the  individual.  And  there 
are  very  many  other  instances  of  similar  type  where  the  right 
of  the  state  to  protect  its  citizens  by  direct  regulation  of 
certain  of  their  actions  is  universally  admitted.  In  a  very 
important  class  of  cases,  therefore,  state  Intervention  has 
become  commonly  accepted,  and  the  claims  of  individuaUsm 
have  been  tacitly  relinquished. 

In  another  very  large  class  of  cases,  however,  dealing 
with  labor  conditions  there  are  still  wide  differences  of 
opinion  and  practice;  for  thanks  to  our  federal  system  we 


THE  PROGRESS  OF  POLITICAL  BELIEFS       295 

have  some  fifty  different  possibilities  in  the  way  of  legisla- 
tive enactment  and  judicial  interpretation.  Those  who  op- 
pose state  intervention  in  such  matters  on  broad  constitu- 
tional grounds  rarely  realize  that  the  basis  of  their  reason- 
ing is  somewhat  antiquated,  and  that  the  arguments  against 
state  regulation  of  working  hours  are  essentially  the  same 
arguments  which  were  originally  brought  forward  in  oppo- 
sition to  quarantine  regulations,  to  compulsory  vaccination, 
and  to  free  schools.  The  theories  of  1820  may  still  per- 
sist in  some  quarters,  but  the  actual  practice  is  gradually 
conforming  to  existing  industrial  conditions.  We  know, 
for  example,  that  at  present  there  Is  no  real  legal  warrant 
for  forcible  government  intervention  in  a  labor  dispute ;  but 
we  also  know  that  even  a  very  conservative  administration 
would  find  a  prompt  solution  of  that  difliculty  In  case  there 
was  imminent  danger  that  the  fuel  supply  would  be  cut  off 
during  a  hard  winter.  What  it  all  amounts  to  Is  that  politi- 
cal theory  has  again  lagged  behind  Industrial  progress;  and 
that  in  order  to  prevent  an  absolute  breakdown  of  the  state 
machinery  we  have  to  meet  each  new  contingency  with  a 
temporary,  makeshift,  and  often  Illegal  remedy.  It  is  the 
contention  of  the  progressive  parties  and  schools  of  all  the 
world  that  the  time  has  come  to  bring  political  theory  into 
conformity  with  existing  facts;  to  recognize  frankly  that 
new  conditions  have  developed  during  the  past  century;  and 
to  meet  these  new  conditions  In  a  legal  and  equitable  way, 
by  offering  a  program  which  will  be  in  accord  with  the 
conditions  and  Ideals  of  the  present  day.  Conservatism  is 
an  admirable  quality,  but  If  persisted  In  past  a  certain  point 
it  becomes  more  dangerous  than  radicalism;  and  adherence 
to  an  outworn  convention  Is  more  disloyal  than  its  abandon- 
ment. The  "  one  boss  shay  "  was  a  worthy  object  of  affec- 
tionate regard;  but  that  regard  would  have  been  badly 
evidenced  If  its  owner  had  maintained  that  it  was  fit  for  use 
as  a  passenger  coach  behind  a  modern  locomotive.  In  the 
same  manner  we  may  look  back  with  respect  to  the  theories 


^^  296  COAL,  IRON  AND  WAR 

and  institutions  of  our  ancestors,  but  we  are  not  justified 
In  assuming  that  they  are  necessarily  adapted  to  present 
use. 

The  divergence  between  Inherited  theory  and  existing  fact 
becomes  most  noticeable  when  we  consider  the  problems 
raised  by  the  rapid  industrial  development  of  the  past  half- 
century,  and  particularly  of  the  past  decade  or  two.  When 
American  Industrial  conditions  of  the  present  day  are  com- 
pared with  those  of  even  twenty  years  ago,  great  changes 
will  be  noted,  on  both  sides  of  the  account.  On  the  one 
hand  are  the  Increase  In  average  size  of  the  business  unit,  the 
extent  to  which  many  industries  have  become  integrated, 
the  development  and  concentration  of  credit  facilities,  and 
the  growing  differentiation  between  actual  ownership  and 
the  immediate  management  of  the  business.  On  the  other 
hand,  we  have  a  working  population  increased  largely  In 
number,  and  changed  greatly  in  type;  the  exhaustion  of 
the  free  land  in  the  west,  which  formerly  acted  as  a  balance 
wheel  against  low  wages;  and  the  growing  strength  and 
changing  Ideals  of  the  labor  unions.  Out  of  these  changed 
conditions  has  come  an  Increased  public  interest  in  all  ques- 
tions concerning  either  wages  or  prices,  and  the  need  for 
at  least  a  tentative  program  for  meeting  the  problems 
offered  by  the  new  industrialism. 

In  facing  these  problems  It  must  be  borne  in  mind  that 
in  addition  to  the  general  difficulties  presented,  common  to 
all  the  Industrial  nations,  there  are  others  which  are  peculiar 
to  the  United  States.  This  Is  due  to  the  complex  nature 
of  our  federal  government.  The  existence  of  the  numerous 
state  governments  offers.  It  is  true,  great  flexibility  in  the 
way  of  experimental  and  local  legislation;  but  on  the  other 
hand  It  presents  a  series  of  written  constitutions,  most  of 
which  were  prepared  during  a  period  when  individualism 
was  the  prevailing  theory.  With  the  added  development 
that  the  courts  are  now  held  as  superior  to  the  legislature, 


THE  PROGRESS  OF  POLITICAL  BELIEFS       297 

it  can  be  seen  that  progress  is  necessarily  slow.  Even  at 
this  day,  in  opposing  proposed  new  legislation,  it  is  more 
effective  to  say  that  it  is  unconstitutional,  than  that  it  is  un- 
just. This  difficulty  arises  in  each  of  the  states;  and  in  at- 
tempting a  broader  treatment  of  any  subject  the  difficulty 
is  augmented  by  the  constitutional  limitations  which  were 
originally  put  upon  the  Federal  power.  Because  of  these 
conditions  there  is  peculiar  need  for  care  that  the  progress 
in  economic  and  industrial  legislation  should  take  such  form 
as  to  meet  general  conditions,  and  not  merely  remedy  specific 
instances  of  injustice;  that  it  should  be  clearly  defined  in 
trend,  and  not  merely  opportunistic;  and  that,  while  re- 
taining touch  with  present  conditions,  it  should  aid  directly 
in  the  improvement  of  such  conditions  and  not  merely  accept 
them  as  necessarily  final.  Our  civilization  is  still  in  course 
of  evolution,  and  government  must  not  only  be  put  into  con- 
formity with  the  present  stage  of  growth,  but  must  be  given 
such  freedom  for  future  development  that  its  agencies  will 
not  be  repressive,  but  inspiring.  In  doing  this,  while  the 
extreme  individualistic  standpoint  of  the  past  may  be  aban- 
doned, it  will  still  be  possible  to  utilize  individual  effort  to 
the  utmost  extent. 

The  form  and  sphere  of  the  State.  It  can  be  seen  that, 
in  the  three  great  modern  industrial  nations,  the  tendency 
from  1880  to  19 14  was  in  substantially  the  same  direction. 
There  are  differences,  it  is  true,  between  the  former  imperial 
paternalism  of  Germany,  the  liberalism  of  England,  and  the 
progressivism  of  the  United  States  —  but  these  differences 
are  due  to  local  conditions,  and  relate  to  points  which  are 
essentially  of  minor  importance.  On  the  other  hand,  the 
three  policies  named  agree  in  two  points  which  are  of 
absolutely  fundamental  importance.  First,  they  are  based 
upon  the  maintenance  of  the  institution  of  private  property, 
holding  that  through  it  the  maximum  amount  of  welfare 
and  prosperity  can  be  assured;  and  in  this  point  they  differ 


agS  COAL,  IRON  AND  WAR 

from  socialism.  Second,  they  are  based  upon  the  regula- 
tion by  the  state  of  such  private  activities  as  affect  the  wel- 
fare of  the  citizen;  and  in  this  point  they  differ  from  the  old 
individualism. 

Assuming  therefore  that  there  was  substantial  agreement 
in  fundamentals  between  German  paternalism,  British  liber- 
alism and  American  progressivism,  it  is  of  interest  to  at- 
tempt to  roughly  outline  the  type  of  state  toward  which  these 
policies  tend,  and  the  sphere  which  state  activities  are  likely 
to  occupy.  In  doing  this  it  is  possible  to  frame  the  state- 
ment in  a  perfectly  general  way,  so  that  it  applies  as  aptly 
to  one  as  to  another  of  the  modern  industrial  nations. 

The  modern  industrial  state  is  a  highly  complex  organism, 
made  up  of  citizens  v^arying  greatly  in  their  natural  charac- 
teristics, their  ability,  and  their  immediate  interests.  But 
under  modern  conditions  this  mass  of  citizens  is  knit  to- 
gether so  closely  by  various  ties  that  no  healthy  development 
of  the  state  can  occur  while  any  class  or  group  of  its  citizens 
is  subject  to  injustice,  or  to  handicaps  of  any  sort  which  can 
possibily  be  removed.  The  state  must,  in  self  protection, 
offer  not  only  defense  against  external  aggression,  but  it 
must  also  offer  absolute  justice  and  equity  within  its  limits. 
Further  than  this,  it  must  aid  in  the  moral,  mental  and 
physical  development  of  the  individual  citizen,  not  for  his 
sake  alone,  but  because  the  state  organism  can  not  develop 
rationally  unless  it  be  composed  of  normally  developed 
units.  Still  further,  since  the  various  productive  industries 
are  the  ultimate  bases  of  our  existing  civilization,  the  state 
must  insure  that  they  are  carried  out,  in  all  of  their  stages, 
with  fairness  to  all  of  the  classes  involved  in  the  process. 
Finally,  since  the  support  of  the  state  is  derived  necessarily 
from  taxation,  the  basis  of  taxation  should  be  so  adjusted  as 
to  be  proportionate  to  the  benefits  derived  from  the  state  by 
the  taxpayer.  And  in  carrying  out  the  state  activities  neces- 
sitated by  this  program,  the  details  must  be  so  planned 
as  to  involve  the  minimum  of  administrative  expense  and 


THE  PROGRESS  OF  POLITICAL  BELIEFS       299 

state  interference  with  private  effort,  consistent  with  secur- 
ing the  desired  results. 

In  the  program  thus  summarized  there  is  nothing  in- 
herently revolutionary,  for  all  of  the  elements  contained  in 
it  have  been  accepted,  at  one  time  or  another,  by  political 
parties  of  very  conservative  type;  and  it  is  not  in  any  sense 
socialistic,  but  is  the  very  antithesis  of  sociaHsm.  It  is,  in 
fact,  merely  the  statement  of  the  policy  which  must  be 
adopted  if  we  are  to  avoid  a  purely  socialistic  regime. 

It  must  be  noted,  furthermore,  that  nothing  is  necessarily 
implied  as  to  the  form  which  may  be  taken  by  the  state 
administration.  It  might  be  an  absolute  monarchy,  as  until 
recently  in  Germany;  a  government  by  Parliamentary  ma- 
jority, as  in  Great  Britain;  or  a  government  by  legislative 
majority  subject  to  court  interpretation  of  written  constitu- 
tions, as  in  the  United  States.  Each  of  these  types  has  its 
own  special  advantages  and  disadvantages;  but  in  the  long 
run  all  of  them  seem  to  have  been  fairly  responsive  to  the 
necessities  of  the  case.  The  British  government,  lacking 
any  actual  control  by  the  House  of  Lords,  is  at  present  the 
most  immediately  responsive  to  waves  of  popular  sentiment; 
while  the  American  government,  with  its  written  constitu- 
tions, is  least  so.  Until  we  are  willing  to  believe  that  every 
temporary  shift  in  publ'c  feeling  should  be  immediately  reg- 
istered in  new  legislation,  this  condition  is  not  entirely  to  be 
regretted. 

The  development  of  theory.  As  a  convenience  in  com- 
paring the  chronologic  relation  between  theory  and  practice, 
the  following  table  has  been  prepared.  It  contains,  by 
order  of  date,  a  list  of  the  principal  books  which  have 
exercised  any  important  influence  upon  the  development  of 
either  industrial  or  political  theory  during  the  century  and 
a  half  covered  by  our  modern  industriaHsm. 

1774.     Smith,  Wealth  of  Nations 

1798.      Malthus,  Principles  of  Population 


300  COAL,  IRON  AND  WAR 

1817.  Ricardo,  Principles  of  Political  Economy 

1839.  Comte,  Philosophie  Positive 

1848.  Mill,  Principles  of  Political  Economy 

1855.  Spencer,  Social  Statics 

1859.  Darwin,  Origin  of  Species 

1865.  Jevons,  The  Coal  Question 

1867.  Marx,  Das  Kapital 

1897.  Sorel,  Socialist  Future  of  Trades  Unions 

1908.  Sorel,  Reflexions  sur  la  Violence 

The  series  above  noted,  beginning  in  the  strictest  individ- 
ualistic teachings,  runs  through  a  modified  individualism,  the 
beginnings  of  the  natural  evolutionary  teaching,  to  Marxian 
socialism  and  finally  to  current  syndicalism. 

The  leadership  of  minorities.  In  a  popular  government, 
under  universal  suffrage,  we  are  apt  to  talk  easily  enough 
about  the  rule  of  the  majority.  But  as  a  matter  of  fact, 
except  at  very  rare  times,  the  rule  actually  exercised  is  that 
of  a  small  but  alert  and  active  minority.  This  is  true  not 
only  of  government,  but  of  all  other  assemblages  of  human 
beings,  for  in  every  case  the  vast  majority  of  the  assemblage 
will  under  ordinary  circumstances  exercise  little  if  any  effect 
on  the  action  of  the  group.  What  we  find  commonly  is  two 
small  opposing  groups,  perhaps  not  making  up  together 
over  ten  per  cent,  of  the  whole,  but  each  with  definite  ideas 
which  it  is  willing  to  attempt  to  carry  out,  and  to  whose 
furtherance  it  is  willing  to  devote  steady  organized  effort. 
The  continuous  struggle,  for  each  of  these  small  groups,  is 
to  obtain  the  support,  active  or  implied,  of  the  large  ma- 
jority, so  as  to  have  a  sanction  for  its  plans  and  actions. 
The  large  mass  which  thus  sways  uneasily  from  one  side  to 
the  other  is  made  up  in  varying  proportions  of  those  who 
are  too  uninterested,  too  stupid,  too  lazy  or  too  unorganized 
to  do  more  than  follow  a  good  lead.  When,  on  very  rare 
occasions,  a  crisis  arises  which  strikes  so  deeply  as  to  cause 
the  majority  to  think  and  act  for  itself,  the  results  are  apt 


THE  PROGRESS  OF.  POLITICAL  BELIEFS       301 

to  be  important  and  sometimes  surprising.  But,  during 
ordinary  times,  we  can  assume  that  any  small  group  with  a 
definite  plan,  willing  to  work  hard  enough  to  secure  its  ac- 
complishment, can  carry  it  through. 

What  is  true  of  political  rule,  is  also  true  of  political 
ideas  and  of  mental  progress  in  general.  A  new  idea  or 
theory,  whether  scientific,  political  or  industrial,  is  de- 
veloped and  enunciated  by  one  man;  it  later  forms  the 
rallying  point  for  a  group.  It  may  finally  be  accepted  by 
all,  but  when  that  time  comes  it  is  wise  to  scrutinize  it  very 
carefully,  for  circumstances  have  probably  changed  suffi- 
ciently to  cause  it  to  lose  its  original  validity. 

Perhaps  the  best  instance,  and  one  fortunately  free  from 
possibiHty  of  present  day  prejudice,  is  afforded  by  the  man- 
ner in  which  popular  ideas  as  to  natural  evolution  in  general 
and  modes  of  evolution  in  particular  struggled  on,  a  decade 
or  so  behind  scientific  leadership.  When  Darwin's  epoch- 
making  work  was  given  to  the  world,  his  clerical  and  other 
opponents  countered  by  arguing  against  the  ideas  of 
Lamarck;  by  the  time  so-called  ''  Darwinism  "  had  become 
a  common-place  of  popular  thought,  scientific  thought  had 
frankly  abandoned  some  of  his  ideas  as  to  modes  of  evolu- 
tion, and  had  made  advance  in  another  direction.  The  drag 
or  delay  in  popular  acceptance  of  a  new  scientific  or  techni- 
cal idea  is  indeed  so  great  that  it  is  almost  safe  to  assume 
invariably  that  any  idea  or  theory  which  is  currently  ac- 
cepted is  probably  wrong  or  obsolete. 

It  may  be  said  that  acceptance  of  the  ideas  set  forth  in 
the  preceding  paragraphs  necessarily  implies  disbelief  in 
democracy  and  in  its  modern  mode  of  expression,  universal 
suffrage.  But  that  does  not  follow,  for  whatever  may  be 
thought  as  to  the  inherent  difficulties  in  the  way  of  operating 
a  thoroughly  democratic  government  so  as  to  secure  rational 
and  ordered  progress,  there  are  still  greater  difficulties  im- 
mediately obvious  with  regard  to  any  other  possible  type 
of  government.     We  have  just  witnessed  the  hopeless  moral 


302  COAL,  IRON  AND  WAR 

collapse,  followed  by  the  complete  material  failure,  of  the 
most  serious  and  promising  attempt  that  the  world  has  ever 
seen  in  the  line  of  industrial  paternalism  carried  out  under 
a  monarchy.  The  moral  bankruptcy  of  German  autocracy 
does  not  encourage  further  attempts  In  that  direction. 

The  truth  seems  to  be,  that  any  group  which  attains 
power,  under  any  form  of  government,  tends  to  become 
reactionary,  arbitrary  and  oppressive.  It  has  reached  this 
position  of  power  because  it  had  an  idea  or  theory  which, 
at  that  moment,  was  of  value  to  the  state.  But  as  time  goes 
on  the  ruling  group  loses  its  freshness  of  viewpoint,  and 
its  possibility  of  progress.  Further  development  must 
come  from  Its  opponents.  The  problem  of  government  is 
to  secure  a  method  for  weighing  new  ideas  and  theories, 
and  for  adopting  those  which  seem  to  promise  improvement. 
The  problem  of  the  people  Is  to  find  peaceful  means  for  re- 
placing political  groups  which  have  become  fossilized. 
Democratic  government,  with  all  its  obvious  difficulties  and 
defects,  makes  it  possible  to  do  this  with  less  friction  than 
in  any  other  type  of  government  available. 

So  we  may  as  well  set  aside  all  vague  yearnings  for 
paternalistic  industrialism  under  the  rule  of  kindly  kings, 
or  even  scientific  management  under  the  advice  of  self- 
nominated  experts,  and  accept  the  fact  that  future  progress 
In  the  great  Industrial  nations  will  be  under  an  increasingly 
democratic  rule.  And  what  will  save  and  justify  demo- 
cracy in  the  long  run  is  the  fact  that  the  very  responsibili- 
ties thrown  on  the  mass  of  the  people  do,  as  time  goes  on, 
develop  characters  and  abilities  to  support  these  responsi- 
bilities. 

The  question  of  class  rule.  In  all  modern  countries  the 
spread  of  industrialism  has  operated  to  bring  about  sharper 
lines  of  definition  between  certain  great  classes  of  the  com- 
munity, whose  ideals  and  desires,  at  any  given  moment, 
may  be  sharply  opposed.     This  condition  is  admitted,  but 


THE  PROGRESS  OF  POLITICAL  BELIEFS       303 

most  of  us  do  not  believe  that  It  Is  so  serious  that  society 
must  be  wrecked  In  order  to  change  It. 

The  weakness  of  the  radical  attack  arises  from  the  fact 
that  there  Is  not  an  Important  country  to-day  In  which  the 
real  class  distinction  Is  between  Capital  and  Labor.  There 
are  very  real  class  differences,  but  the  possession  of  money  Is 
not  the  sharpest  ground  of  distinction.  The  classes  tend  to 
separate  along  other  lines  of  cleavage,  brought  about  by 
their  life-long  training  and  habits. 

What  we  really  have  to  deal  with  In  most  countries  are 
three  large  groups.  One  of  these  owns  or  works  agricul- 
tural land;  one  Is  Interested  in  trade  and  commerce;  and 
one  supplies  transport  and  factory  labor.  When  a  radical 
speaks  of  Labor  with  a  capital  L,  he  refers  solely  to  this 
last  class,  and  he  disregards  the  facts  that  members  of  the 
other  two  classes  really  work,  and  that  his  specific  Labor 
group  makes  up  a  minority  of  the  population  in  practically 
every  country.  If  we  take  the  United  States,  France  and 
Germany  as  three  representative  countries,  and  average  the 
results.  It  Is  probable  that  the  three  groups  named  would 
be  approximately  equal  in  numbers,  each  making  up  around 
a  third  of  the  employed  population.  Great  Britain,  owing 
to  the  present  small  development  of  agriculture.  Is  much 
more  poorly  balanced  in  this  respect,  and  this  fact  has  im- 
portant effects  upon  her  political  development.  But  for 
the  other  three  countries,  and  indeed  for  most  of  the  other 
nations  of  the  globe,  we  may  fairly  assume  that  the  dis- 
tinctively Labor  group  nowhere  represents  more  than  a 
strong  minority. 

A  balance  of  power  of  this  sort  does  not  promise  much 
In  the  way  of  very  radical  re-adjustment  of  society,  but  on 
the  other  hand  it  offers  a  very  fair  guarantee  that  no  one  of 
the  groups  Is  likely  to  suffer  from  scandalous  111  treatment. 
If  any  reform  becomes  urgently  and  obviously  necessary,  it  Is 
always  brought  about  by  temporary  coalition  of  two  of  the 


304  COAL,  IRON  AND  WAR 

groups.  The  underlying  differences  In  requirements  are  so 
great  that  the  coalition  Is  never  permanent.  All  of  our  fiscal 
and  commercial  policies,  from  the  beginnings  of  the  Republic 
to  the  present  day  have  been  carried  out  by  groupings  of  this 
temporary  sort;  and  It  Is  probable  that  our  Industrial  poli- 
cies of  the  future  will  be  handled  In  similar  fashion.  Until 
the  time  comes  that  external  economic  pressure  Is  so  great 
that  it  seriously  Interferes  with  the  well  being  of  all  three 
classes,  we  are  not  likely  to  see  any  very  serious  results 
from  radical  propaganda  In  the  United  States,  or  even  in 
the  more  important  European  states. 


CHAPTER  XXIII 
THE  TREND  AND  RATE  OF  FUTURE  GROWTH 

In  an  earlier  chapter,  when  the  causes  of  industrial  de- 
velopment were  under  consideration,  certain  factors  which 
tended  to  fix  the  rate  of  such  growth  were  noted  and  dis- 
cussed. The  question  then  at  issue  was  as  to  the  rate  which 
industrial  growth  had  shown  during  the  past  century  or 
more,  and  for  that  purpose  a  general  average  over  that 
period  was  sufficient.  We  may  now  take  up  the  figures  then 
used,  and  examine  them  from  a  somewhat  different  stand- 
point, in  order  to  get  some  idea  as  to  what  they  indicate 
with  regard  to  future  developments. 

Primarily,  it  may  again  be  suggested  that  the  pheno- 
menon of  rapid  growth,  to  which  the  world  became  so  ac- 
customed during  the  period '1770-1910,  was  not  one  which 
had  always  existed,  or  which  must  always  exist  tin  future. 
As  to  the  first  of  these  statements,  we  have  of  course  ample 
data  available  for  proving  that  in  all  the  centuries  prior  to 
the  Industrial  Revolution  there  was  an  entirely  different 
condition  existing,  with  regard  to  both  population  and  in- 
dustry, than  has  been  shown  during  the  past  century  and  a 
half.  Nowadays  we  think  that  a  year  which  should  fail 
to  show  an  increase  in  population  or  in  commodity  output 
is  something  remarkable,  which  requires  explanation.  But 
throughout  very  many  centuries  there  were  not  only  single 
years,  but  decades  and  full  centuries  which  were  marked  by 
just  such  conditions  of  entire  lack  of  growth. 

Even  at  its  most  favorable,  the  rate  of  increase  prior  to 
1750  or  thereabout  was  very  low,  which  is  indicated  for  one 
thing  by  the  population  statistics  relative  to  England,  whose 
protected  position  certainly  was  favorable  to  growth  rather 
greater  than  that  of  continental  Europe.     We  know,  on  the 

305 


3o6  COAL,  IRON  AND  WAR 

basis  of  more  or  less  close  estimates  made  for  various  pur- 
poses, that  the  population  of  England  grew  about  as  fol- 
lows during  the  centuries  noted: 

Population  Per  cent,  increase 

Year  England  and  Wales  per  century 

1100 1,800,000 

1400 2,500,000  11 

1600 5,000,000  40 

1700 5,500,000  10 

1750 6,500,000  45 

1800 8,900,000  70 

1851 17,900,000  200 

1901 32,500,000  170 

From  this  table,  where  the  percentages  of  increase  per 
century  have  been  added  with  as  much  precision  as  the  mat- 
ter is  worth,  we  can  see  very  clearly  that  in  place  of  a  growth 
of  population  at  a  modern  high  rate,  there  was  in  reality 
a  very  low  average  rate  of  increase  for  many  of  the  cen- 
turies of  English  history.  Further,  it  is  made  clear  that  in 
place  of  steady  growth  there  were  really  several  very  abrupt 
changes  in  rate.  We  might  fairly  say  that  the  ordinary 
rate  of  growth  of  English  population  was  not  over  ten  per 
cent,  a  century;  but  that  during  two  periods  of  about  one 
hundred  years  each  this  rate  of  growth  was  very  largely 
exceeded.  One  of  these  periods  was  that,  from  1500  to 
1600,  which  was  marked  all  over  Europe  by  the  trade  ac- 
tivity brought  on  by  the  American  discoveries,  a  fact  which 
we  have  already  come  across  in  discussing  the  effects  of  gold 
discoveries  on  prices.  The  second  period  of  exceptional 
growth  was  that  beginning  in  the  eighteenth  century  and  last- 
ing until  now.  It  was  the  period  affected  by  modern  indus- 
trialism. 

We  see,  therefore,  that  the  rate  of  population  increase 
has  not  always  been  as  high  as  that  to  which  we  have  grown 
accustomed.  But  we  see  also  that  once  before,  during  the 
Elizabethan  period,  an  unpreced^ntly  high  rate  of  increase 


THE  TREND  AND  RATE  OF  FUTURE  GROWTH   307 

did  take  place,  and  that  this  did  not  endure,  but  was  fol- 
lowed by  a  falling  back  to  the  old  low  rate  of  growth. 
This  is  of  particular  interest  to  our  present  inquiry,  because 
it  implies  that  a  similar  retrograde  movement  may  be  re- 
peated in  the  future.  It  will  be  of  interest  to  examine  the 
available  data  more  closely  than  has  been  yet  attempted,  in 
order  to  see  if  they  suggest  any  such  possibility  as  imminent. 
For  this  purpose  we  can  make  use  of  the  tables  of 
American  and  world  population  already  used  on  page  188 
of  this  volume.  The  calculated  percentages  of  increase  per 
decade,  as  shown  there,  seem  to  indicate  a  quite  definite 
downward  trend  in  rate,  which  is  brought  out  much  more 
strikingly  when  it  is  placed  in  diagrammatic  form,  as  in 
figure  9,  below. 


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Fig.  9.     Rate  of  population  increase,  1800-1910 

In  this  figure  we  have  used  three  sets  of  data,  relating 
respectively  to  the  population  growth  of  the  United  States, 
of  England,  and  of  the  world.  The  two  former  are  based 
on  exact  figures;  the  last  is  based,  of  course,  in  large  part 
on  estimates  and  may  therefore  be  given  somewhat  less 
weight.     But  as  a  matter  of  fact  all  three  of  the  sets  of 


3o8  COAL,  IRON  AND  WAR 

results  show  the  same  tendency  toward  a  lowering  rate  of 
increase.  This  was  first  shown  by  the  United  States  in 
1870,  when  even  after  correction  of  the  earlier  incorrect 
census  figures  there  was  a  very  startling  drop  in  rate  of 
increase  as  compared  with  anything  that  had  been  previously 
shown  by  America.  The  English  rate  reached  its  maximum 
in  the  decade  18 10-1820,  and  has  fallen  irregularly  since, 
its  last  downward  swing  having  taken  place  around  1890. 
The  world  figures  when  a  fall  in  rate  from  around  1850, 
which  became  still  more  marked  around  1890. 

With  these  facts  in  mind,  and  having  regard  to  the  cer- 
tainty that  the  various  censuses  to  be  taken  in  1920  will 
necessarily  show  very  trifling  rates  of  population  increase 
in  all  of  the  warring  European  nations,  we  are  forced  to 
accept  the  conclusion  that  one  very  important  factor  in  our 
modern  civilization  is  apparently  now  in  process  of  showing 
a  change  from  its  previous  high  rate  of  growth.  If,  indeed, 
a  very  rapid  rate  of  population  increase  were  a  necessary 
factor  in  world  progress,  the  results  of  our  inquiry  to  this 
point  would  be  distinctly  disquieting.  Fortunately  this  is 
not  the  case,  for  as  we  have  seen  earlier,  population  is  apt 
to  increase  as  material  and  social  growth  expands,  but  it 
does  not  operate  directly  to  incite  such  growth. 

If  we  are  indeed  facing  a  period  during  which  popula- 
tion, though  still  increasing,  is  not  expanding  as  fast  as  it  has 
done  during  the  past  century  or  so,  the  effects  which  we  may 
fairly  expect  to  accompany  this  phenomenon  will  certainly 
have  certain  important  and  interesting  social  and  industrial 
effects.  Primarily,  for  example,  it  would  seem  to  imply 
that  there  will  be  possible  a  relatively  higher  average  stand- 
ard of  living  and  of  general  comfort  than  would  be  possible 
under  other  conditions,  and  than  has  been  possible  at  any 
time  in  the  past.  There  should  also  be  a  tendency  toward 
lessened  friction  between  classes  within  the  nations;  and  if 
the  fall  in  rate  extends  to  all  peoples  alike,  lessened  reason 
for  friction  between  the  nations.     This  last  qualification  is 


THE  TREND  AND  RATE  OF  FUTURE  GROWTH   309 

of  high  importance,  for  obviously  a  differential  rate  of  popu- 
lation increase,  bearing  heavily  against  the  white  races  alone, 
would  in  the  long  run  be  a  serious  matter. 

Effects  on  industry.  In  its  more  direct  bearing  on  the 
future  of  industrial  development,  a  falling  off  in  the  rate 
at  which  population  has  heretofore  increased  would  obvi- 
ously act  to  cause  differences  in  rate  of  growth  of  two 
classes  of  industries,  according  as  they  are  or  are  not  di-- 
rectly  related  to  population.  All  the  Industries  whose  pro- 
ducts are  Increased  in  demand  only  as  population  Increases 
would  be  less  rapidly  developed  In  future  than  in  the  past, 
and  less  rapidly  developed  than  the  other  and  larger  class 
of  industries  in  which  demand  does  not  vary  directly  with 
population.  In  practice  this  would  mean  that  there  would 
be  relatively  less  pressure  than  heretofore  against  the  food 
supply,  a  condition  which  would  be  desirable  from  every 
point  of  view.  We  might  hope  that  in  the  years  to  come 
our  future  Improvements  In  transport  and  agriculture  would 
at  last  more  than  keep  pace  with  Increased  demand. 

As  for  the  mass  of  the  manufacturing  Industries,  the  dif- 
ferentiation between  them  would  take  place  along  the  same 
lines.  Such  industries  as  made  articles  of  limited  personal 
use  would  In  future  grow  less  rapidly  than  those  which 
made  articles  whose  per  capita  utilization  can  be  largely  In- 
creased. On  the  other  hand,  the  objects  used  by  com- 
munities are  limited  in  demand  by  the  wealth  available  for 
their  purchase,  rather  than  by  the  number  of  people  whom 
they  will  serve.  And  if  in  future  wealth  Increases  much 
faster  than  population  we  may  expect  to  see  very  remark- 
able examples  of  Its  employment  for  civic  and  national  uses. 

We  may  go  further,  and  suggest  that  there  Is  likely  to 
be  a  much  more  rapid  rate  of  Increase  In  highly  finished 
products,  both  old  and  new,  than  there  will  be  in  the  heavy 
staples.  This  condition  would  affect  the  future  rate  of 
growth  of  the  iron  Industry,  and  to  a  lesser  extent  that  of 
jcoal  mining;  and  In  each  of  these  cases  it  might  be  expected 


3IO  COAL,  IRON  AND  WAR 

to  bear  most  seriously  upon  the  more  primitive  utilizations 
of  the  two  products.  That  is  to  say,  in  future  we  may 
expect  to  see  a  less  proportion  of  the  coal  used  for  mere 
hauling  of  goods,  and  a  larger  proportion  for  making  goods; 
and  of  the  Iron  less  will  go  Into  ships  and  more  into  finished 
articles. 

The  effects  on  iron.  In  earlier  discussion  of  the  dura- 
tion of  the  world's  supply  of  iron  ores,  It  was  noted  that  the 
pessimistic  conclusions  often  reached  depended,  in  the  last 
analysis  upon  the  assumption  that  the  demand  for  iron  would 
increase  at  a  very  high  rate  each  decade.  It  was  suggested 
that  this  assumed  rate  of  future  increase  might  not  actually 
be  attained,  which  of  course  would  remove  all  reasonable 
fear  of  exhaustion  of  our  ore  supplies.  Now  this  sugges- 
tion was  not  based  upon  our  present  Idea  that  population 
may  not  Increase  In  future  as  rapidly  as  it  has  in  the  past, 
but  upon  an  entirely  Independent  and  more  direct  line  of 
evidence.  For  when  we  come  to  examine  the  actual  records 
over  recent  decades  we  find  that  there  seems  to  be  indeed 
some  reason  to  expect  a  comparatively  imminent  falling  off 
In  the  rate  of  Increase.  Writing  early  In  19 14  \  before  the 
World  War  had  come  to  complicate  matters,  it  was  pos- 
sible to  summarize  conditions  as  they  then  appeared  as 
follows : 

Though  iron  and  steel  are  not  imperishable,  the  amount 
which  is  lost  to  the  world  each  year  is  a  mere  fraction  of  the 
annual  supply,  and  this  fraction  is  becoming  relatively  smaller 
each  year.  The  chief  loss  is  by  rusting,  though  the  more  spec- 
tacular losses  to  which  attention  is  called  are  through  ship- 
wrecks, mine  disasters,  etc.  As  the  world  goes  on  we  may 
fairly  expect  that  both  these  sources  of  loss  will  decrease,  at 
least  relatively  to  the  total  supply.  But  this  Implies  that  the 
bulk  of  the  year's  output  is  added  to  a  steadily  increasing  stock 
of  iron  and  steel  already  in  use ;  and  obviously  there  must  come 
a  time  when  the  stock  on  hand  will  be  sufficient  for  all  uses, 

1  Eckel,  E.  C.     •'  Iron  Ores,"  page  407.     New  York,  1914. 


THE  TREND  AND  RATE  OF  FUTURE  GROWTH      311 

with  the  help  of  comparatively  slight  additions  and  renewals. 
This  may  be  accepted  as  a  certainty  of  the  future ;  and  the  only 
question  then  is,  whether  the  slacking  off  in  demand  is  likely 
to  occur  soon  or  at  an  indefinitely  future  day.  Of  course  this 
question  can  not  be  answered  with  any  precision,  but  even  a 
summary  of  the  main  facts  bearing  on  it  brings  out  some  points 
of  interest. 

If  we  could  confine  attention  to  Europe  and  the  United 
States,  it  could  be  said  that  both  the  annual  output  and  the 
consumption  have  shown  steady  and  large  increases  for  many 
years;  but  that  in  spite  of  this  fact  there  are  certain  features 
indicating  that  the  turning  point  may  be  nearer  than  expected. 
There  must  be  noted,  for  example,  that  in  certain  lines  the 
industry  is  not  progressing  as  fast  as  heretofore;  the  rail-mill 
capacity  of  the  United  States,  as  an  instance,  is  probably  almost 
twice  as  great  as  the  average  annual  requirements.  And  there 
is  the  far  more  important  fact  that  the  great  producing  nations 
have,  during  the  past  decade,  been  led  to  depend  more  and 
more  upon  the  export  trade,  not  only  during  years  of  depres- 
sion at  home,  but  during  normal  years.  It  is  indeed  very 
doubtful  if  the  civilized  portion  of  the  world,  confined  to  its 
own  markets,  could  hold  the  50  per  cent,  rate  of  increase  for 
more  than  a  decade  longer. 

But  the  outlook  becomes  more  encouraging  when  the  other 
parts  of  the  world  are  recalled  to  mind.  At  present  Euro- 
pean and  American  mills  supply  the  iron  and  steel  requirements 
of  a  civilized  area  which  contains  about  one-third  of  the  inhab- 
itants of  the  globe.  At  first  glance  it  might  be  assumed  that 
the  sudden  modernization  of  the  world  would  afford  a  market 
for  about  three  times  our  present  annual  steel  production. 
This,  however,  would  be  an  error  of  the  same  type  which  is 
encountered  when  the  western  United  States  is  compared,  for 
example,  as  a  possible  steel  or  cement  market,  with  the  east  or 
middle  west,  on  a  purely  population  basis.  Steel  consumption 
is  not  entirely  dependent  on  population;  and  large  portions  of 
the  earth's  surface  will  never  be  as  important  consumers  as 
Europe.  If  we  had  any  exact  data  on  the  coal  reserves  of  the 
world  they  might  serve  as  a  better  basis  of  comparison  than 
population.     But  since  exactness  is  not  required  in  the  present 


312  COAL,  IRON  AND  WAR 

discussion,  it  might  perhaps  be  safely  assumed  that  if  the  en- 
tire world  could  be  suddenly  modernized  up  to  the  standard  of 
Europe  and  the  United  States,  a  market  for  between  125  and 
175  million  tons  of  steel  per  year  could  be  found  now. 

This  is  somewhat  more  than  double  the  present  output  of 
the  world ;  but  it  is  only  about  what  the  present  rate  of  growth 
will  produce  by  1930.  So  that  even  on  this  basis,  two  decades 
more  may  see  the  beginning  of  a  decreased  rate  of  growth  in 
the  steel  industry  of  the  world. 

The  preceding  statement  has  been  quoted  exactly,  in 
place  of  re-writing,  in  order  to  place  on  record  the  stand- 
point of  pre-war  days,  which  is  free  from  the  influences 
which  might  be  assumed  to  affect  a  later  judgment.  But  as 
a  matter  of  fact,  the  war  has  strengthened  these  conclu- 
sions, rather  than  weakened  them.  In  place  of  waiting 
until  1930  for  the  first  marked  decease  in  rate  of  output, 
we  will  see  it,  unless  all  present  business  signs  fail,  when  we 
come  to  compare  the  world  figures  for  1920  with  those  of 
19 10.  At  the  old  established  rate  of  increase  the  world, 
having  made  6^  million  tons  of  pig-iron  in  19 10,  would  be 
expected  to  make  some  100  million  tons  in  1920.  This 
seems  to-day  a  hopelessly  impossible  task.  We  can  go 
even  further.  The  lowest  rate  of  increase  of  the  world's 
iron  industry,  in  any  decade  since  1800,  was  the  33  per 
cent,  shown  by  18 10-1820,  which  was  affected  by  the  past 
Napoleonic  war  depression.  If  we  drop  even  to  this  low 
level  of  increase,  the  world  should  produce  at  least  86  mil- 
lion tons  of  pig-iron  in  1920.  It  will  be  interesting  to  see 
what  the  figures  do  actually  show  at  the  end  of  1920,  for 
It  begins  to  look  as  if  we  should  make  a  new  low  record  in 
rate  of  increase,  as  compared  with  anything  experienced 
since  1800. 

The  record  of  coal  and  iron.  It  might  be  noted  that 
somewhat  the  same  general  tendencies  are  exhibited  when 
we  come  to  examine  the  record  of  coal  production  during  the 
past  century,  and  to  compare  the  rates  of  increase  which  it 


THE  TREND  AND  RATE  OF  FUTURE  GROWTH   313 

has  shown  In  successive  decades.  In  the  following  table 
such  comparisons  are  made  for  both  the  coal  and  Iron 
output  of  the  world  for  the  period  between  1800  and  19 10, 

Decade  World  coal  output,      World  iron  output, 

Ending  per  cent,  of  increase    per  cent,  of  increase 

1810 24  38 

1820 19  33 

1830 45  83 

1840 78  71 

1850 82  57 

1860 75  72 

1870 50  77 

1880 54  52 

1890 55  49 

1900 50  46 

1910 51  62 

In  both  Industries  the  greatest  sustained  rate  of  advance, 
during  their  entire  history,  was  shown  during  two  periods. 
One  of  these,  not  shown  In  the  above  table,  extended  from 
around  1770  to  about  18 10,  and  covered  the  time  of  the 
so-called  Industrial  Revolution  In  England.  The  other  and 
more  important  extended  from  around  1825  to  1865;  it 
developed  from  the  long  depression  which  followed  the 
Napoleonic  wars,  and  covered  the  periods  during  which 
Germany  and  the  United  States  laid  the  foundations  of  their 
great  industrial  development. 

Since  the  close  of  this  last-mentioned  period  of  rapid 
growth,  though  both  coal  and  iron  output  have  of  course 
shown  large  increases,  neither  industry  seems  to  indicate 
a  return  to  that  very  exceptional  rate  of  growth.  Both 
seem  to  have  settled  down  to  a  much  slower  rate,  and  in 
bad  times  to  fall  below  even  this  recent  average.  The 
great  increases  in  rate  of  growth,  during  our  later  boom 
periods,  have  been  exhibited  more  markedly  by  many  other 
products  than  by  coal  and  Iron,  as  we  seen  when  we  noted 
the  growth,  during  recent  decades,  of  the  newer  metals  and 


(314  COAL,  IRON  AND  WAR 

chemical  products.  That  is,  Indeed  the  direction  in  which 
the  greatest  future  progress  Is  likely  to  be  shown,  for  we 
seem  to  be  merely  on  the  threshold  of  the  development  of 
alloys  and  chemical  products. 

The  fall  of  prices.  Without  regard  to  its  effect  on  popu- 
lation increase,  the  World  War  had  certain  very  definite 
and  obvious  effects  on  industry  and  trade.  There  was  a 
tremendous  demand  for  certain  lines  of  products,  regard- 
less of  price;  there  was  a  heavy  increase  In  governmental 
indebtedness;  and  there  was  a  rise  in  prices  which  can  only 
be  compared  to  the  similar  rise  caused  during  the 
Napoleonic  wars.  This  rise  was  caused  alniost  entirely 
by  the  vast  government  expenditures,  carried  out  by  use  of 
a  highly  Inflated  currency.  Beginning  in  foods  and  muni- 
tions, the  rise  spread  gradually  into  all  other  commodities. 
Beginning  in  the  warring  nations  and  in  markets  from 
which  they  drew  their  supplies.  It  spread  finally  all  over  the 
world.  Among  its  earlier  effects  were  great  rises  In  wages; 
among  its  later,  very  widespread  labor  unrest.  Financially, 
it  expressed  Itself  In  a  phenomenal  rise  In  Interest  rates,  so 
that  even  entirely  peaceful  and  stable  governments  are  now 
paying  double  the  rate  which  would  have  been  necessary 
ten  years  ago. 

The  conditions  which  now  exist,  in  respect  to  prices,  in- 
terest rates  and  social  unrest  are  essentially  temporary;  and 
unless  some  entirely  new  factor  intervenes  we  may  reason- 
ably expect  to  see  them  changed  very  soon.  The  heaviest 
of  the  government  expenditures  are  completed,  and  a  period 
of  relative  economy  will  arrive  In  all  countries.  The  In- 
flated currencies  will  be  deflated  as  painlessly  as  possible, 
and  as  government  finance  approaches  sanity,  prices  will 
fall  steadily  and  irresistibly.  With  their  fall,  since  wages 
do  not  fall  as  rapldiy,  there  will  be  a  long  period  during 
which  social  conditions  will  be  easier  for  the  average  citizen, 
wage-earner  or  not.  And  there  will  ultimately  be  a  cor- 
responding decrease  in  average  interest  rates.     If  the  ex- 


THE  TREND  AND  RATE  OF  FUTURE  GROWTH   315 

periences   of  the  Napoleonic  wars  are   repeated,  we  may 
fairly  expect  to  see  sound  governments  able  to  refund  loans 
at  three  per  cent,  or  so  within  a  decade  of  the  end  of  the      . 
World  War.  *^ 

The  new  impetus.  We  have  seen  that,  at  the  commence-  ^'^ 
ment  of  the  World  War,  industries  and  prices  seemed  to 
have  reached  and  indeed  passed  over  a  temporary  high 
point,  and  to  be  started  on  a  slight  decline.  The  war  in- 
terrupted this  process,  and  changed  its  result.^ What  we 
have  now  to  face  is  a  different  condition,  in  which  the  war- 
effects  will  have  more  weight  than  any  normal  trade  fac- 
tors. 

We  can  assume  that  the  fall  in  prices  and  interest  rates, 
together  with  increased  government  and  private  economy, 
will  operate  to  deflate  a  number  of  unsound  industries  all 
over  the  world.  This  of  itself  will  not  be  a  bad  thing  for 
the  world,  for  falling  prices  do  not  necessarily  mean  dan- 
ger to  either  labor  or  capital,  so  long  as  they  do  not  arise 
from  decreased  demand.  Even  if  prices  and  profits  per 
ton  fall  off,  the  total  profits  of  an  industry  may  increase 
provided  more  tons  of  the  product  can  be  marketed.  So 
that  the  long  period  of  lowering  prices,  due  to  currency  de- 
flation, to  which  we  look  forward  does  not  necessarily  imply 
Industrial  depression. 

On  the  other  hand,  a  period  of  world-wide  trade  activity, 
such  as  came  about  around  1825,  1845  ^^^  1898,  may  be 
expected  to  come  whenever  a  sufficient  Inciting  cause  Is  set 
In  operation.  This  cause  will  probably  be  the  commence- 
ment of  intensified  development  in  one  of  the  three  back- 
ward continents,  and  there  are  some  reasons  for  believing 
that  It  will  take  place  In  Africa,  rather  than  In  Asia  or 
South  America. 

All  of  the  changes  which  have  been  noted  above  as  likely 
to  follow  from  conditions  now  existing  may  be  accelerated 
or  retarded  by  the  introduction  of  new  factors,  and  some 
qf  the  more  important  of  these  possible  factora  may  now 


3i6  COAL,  IRON  AND  WAR 

be  taken  up  in  the  Idea  of  determining  their  probable  In- 
fluence and  extent.  So  in  the  following  chapters  we  will 
consider  the  question  of  world  competition  in  general,  and  of 
the  competition  likely  to  be  offered  by  new  or  re-awakened 
nations  in  particular,  so  far  as  these  matters  are  likely  to 
bear  upon  our  own  industrial  or  social  conditions.  And  in 
a  still  later  chapter  we  will  consider  the  question  of  war, 
which  would  operate  to  prevent  a  fall  In  prices  and  in 
Interest  rates,  just  as  the  overwhelming  competition  of  a 
new  industrial  nation  might  operate  to  accelerate  these 
changes  and  make  them  serious.  For  though  falling  prices 
in  themselves  are  an  advantage  to  most  of  the  community, 
falling  prices  accompanied  by  unemployment,  due  to  re- 
striction of  the  market,  are  far  from  advantageous  to  any- 
one. It  will  therefore  be  profitable  to  go  on  to  considera- 
tion of  world  competition  and  of  war,  and  to  see  whether  or 
not  there  is  any  necessary  relation  between  them. 


CHAPTER  XXIV 
THE  FACTORS  OF  WORLD  COMPETITION 

Emerging  from  a  war  which  has  left  the  civiHzed  world 
very  poor  indeed,  we  must  prepare  to  go  on  into  a  trade 
competition  which  will  assume  sharper  forms  than  it  has 
ever  done  in  the  past,  since  the  necessities  of  the  sellers  are 
greater,  in  the  case  of  manufactured  products,  than  are 
those  of  the  buyers  of  such  products.  This  condition  has 
arisen  because  of  the  war.  It  would  not  exist  if  all  the 
countries  of  the  world  had  suffered  equally  by  that  war. 
Unfortunately  this  was  not  the  case;  the  losses  in  real 
wealth  —  men  and  commodities  —  fell  upon  the  white 
race  almost  exclusively,  and  in  reality  upon  two  particular 
branches  of  that  race.  Further  than  that,  the  war  acted 
as  a  selective  agency  in  destroying  manhood  of  the  leading 
industrial  countries,  for  of  the  great  world  competitors  of 
19 13  only  Japan  escaped  entirely  unscathed.  As  a  re- 
sult, it  might  be  said  broadly  that  the  manufacturing  coun- 
tries are  left  poor;  the  countries  which  produce  food  and 
other  raw  materials  are  enriched  relatively. 

But  even  within  the  industrial  group  of  nations  the  losses 
are  not  equally  divided.     Japan,  as  noted,  is  not  impover-^> 
ished  but  enriched  on  balance;  the  United  States  has  lost^ 
relatively  little;  but  Germany,   France  and  Great  Britain 
have  contributed  too  heavily  in  lives  to  emerge  unshaken.^ 
Later  we  may  recur  to  some  of  these  matters,  in  an  effort  to 
estimate  the  future  relative  importance,  from  competitive 
standpoints,  of  these  different  countries.     But  at  present  we 
may  merely  accept  the  fact  that  the  losses  have  in  all  cases 
been  severe,  and  that  in  order  to  re-adjust  the  financial  posi- 
tion the  export  trade  will  receive  even  more  attention  than 
heretofore  from  all  the  great  manufacturing  nations. 

Z^7 


3i8  COAL,  IRON  AND  WAR 

The  rise  of  foreign  trade.  Regardless  of  the  effects  of 
protective  tariffs,  a  growing  industry  through  its  early  stages 
finds  all  of  its  activities  necessary  in  its  struggle  to  secure 
a  firm  footing  in  its  home  market.  At  a  later  stage,  pro- 
vided the  industry  is  firmly  grounded  so  far  as  raw  materials 
and  other  manufacturing  conditions  are  concerned,  it  will 
reach  the  point  where  it  substantially  dominates  its  home 
market,  into  which  foreign  manufacturers  will  be  able  to 
ship  only  during  periods  of  very  high  local  prices.  At  a 
still  later  stage  of  its  development,  the  industry  will  find 
that,  first  in  years  of  bad  business  at  home,  and  later  in  all 
years,  it  will  have  a  surplus  manufacturing  capacity,  which 
it  can  either  shut  down  unprofitably,  or  use  to  provide  a  sur- 
plus tonnage  of  its  product,  which  can  be  shipped  to  a  for- 
eign market.  All  of  this  is  a;n  entirely  natural  development, 
and  occurs  in  about  this  order  in  all  of  our  larger  indus- 
tries, so  far  as  these  have  been  based  on  good  natural  re- 
sources. We  are  usually  proud  of  the  export  trade  thus  de- 
veloped, but  at  times  some  of  its  necessary  features  give  rise 
to  misunderstanding  and  consequent  criticism.  Since  the 
United  States  will  in  future  be  forced  to  engage  more 
heavily  in  export  business  than  it  has  in  pre-war  times,  it 
will  be  well  to  see  how  these  misunderstandings  arise.  The 
export  trade  has  enough  troubles  of  its  own  without  having 
constant  investigations  or  prosecutions. 

In  order  that  any  country  may  steadily  and  profitably  ex- 
port any  manufactured  commodity,  there  are  two  essential 
requisites.  The  commodity  must  be  produced  more  cheaply 
in  the  exporting  country  than  in  the  market  country,  even 
after  allowing  for  freights  to  the  market;  and  there  must  be 
a  surplus  tonnage  of  such  commodity,  or  surplus  producing 
capacity,  in  excess  of  domestic  requirements.  The  first 
condition  implies  that  the  exporting  country  must  have 
natural  advantages  with  regard  to  certain  factors  in  pro- 
duction —  it  must  have  good  and  abundant  raw  materials, 
satisfactory  labor  supply,  cheap  capital,  or  other  advantages 


THE  FACTORS  OF  WORLD  COMPETITION      319 

of  these  types.  The  second  condition  implies  that  the  in- 
dustry in  question  has  been,  either  accidentally  or  intention- 
ally, overbuilt  beyond  the  average  requirements  of  the  do- 
mestic market.  As  a  matter  of  fact  the  overbuilding  is 
usually  accidental,  not  intentional,  and  the  fact  that  it  exists 
Is  only  realized  when  hard  times  set  in  at  home.  It  Is 
then  found  that  the  domestic  market  will  not  absorb  all 
the  product  that  can  be  made,  and  the  two  alternatives 
faced  by  the  manufacturer  are  to  partly  shut  down  his  mills 
or  to  attempt  to  find  a  foreign  market  for  the  surplus.  Re- 
duction of  output  means  decrease  in  the  labor  employed 
and  usually  an  increase  in  the  manufacturing  cost  per  ton  of 
finished  product,  because  much  of  the  overhead  charges  run 
on  regardless  of  whether  the  mill  is  running  full  or  not. 
Exporting  the  surplus  product  enables  the  manufacturer  to 
avoid  both  of  these  difficulties. 

It  has  been  said  that  the  first  export  of  any  manufactured 
commodity  usually  occurs  during  a  time  of  business  depres- 
sion at  home.  The  exports  then  made  are  not  taken  up  with 
any  idea  of  securing  abnormal  or  even  reasonable  profits,  but 
simply  in  order  to  relieve  the  home  situation.  Under  these 
conditions  export  sales  can  be  made  at  any  price  above  actual 
manufacturing  cost;  and  the  price  may  be  varied  from  point 
to  point  In  order  to  meet  competition  effectively.  The 
prime  requisite  is  to  sell  sufficient  goods  to  keep  the  mills 
running  at  their  point  of  maximum  efficiency  and  minimum 
cost  per  ton. 

This  first  experiment  in  the  export  trade  is  commonly 
followed  by  prompt  withdrawal  from  It  as  soon  as  home 
business  begins  to  Improve.  For  ten  or  twenty  years  Amer- 
ican steel  producers,  for  example,  made  sporadic  efforts 
to  export  during  times  of  bad  business  at  home,  dropping 
the  foreign  trade  as  soon  as  the  home  demand  resumed. 
But  later  In  the  history  of  an  Industry  It  is  seen  that  an 
export  trade  can  not  be  played  with  in  this  fashion,  if  It 
IS  ever  to  amount  to  anything.     If  the  foreign  market  Is 


320  COAL,  IRON  AND  WAR 

to  be  useful  In  bad  times  it  can  not  be  entirely  abandoned 
during  good  years;  and  when  this  is  understood  the  export 
business,  in  any  given  line,  assumes  a  more  steady  and  con- 
tinuous form. 

The  practice  of  dumping.  A  steady  and  continuous  ex- 
port trade,  however,  implies  that  in  periods  when  trade  is 
good  at  home  but  depressed  abroad,  which  often  happens, 
representation  in  foreign  markets  can  be  retained  only  by 
selling  some  portion  of  the  tonnage  at  prices  below  the  do- 
mestic level.  This  practice,  which  is  known  as  "  dumping," 
is  subjected  to  severe  and  largely  unmerited  criticism  by 
those  who  do  not  understand  its  origin  and  its  merits. 
When  it  is  carried  out  the  home  consumer  pays  for  his 
commodity  the  same  price  he  would  pay  in  any  case;  the 
foreign  consumer  pays  whatever  price  is  necessary  to  meet 
local  competition.  The  home  market  receives,  in  addition 
to  the  commodity,  the  stimulus  of  active  mills  and  fully  em- 
ployed labor.  The  foreign  consumer  receives  a  commodity 
at  perhaps  too  low  a  price.  The  foreign  competitor  re- 
ceives —  competition. 

There  is  of  course  an  entirely  different  phase  of  the  dump- 
ing question,  one  which  has  been  forced  on  the  world's  at- 
tention of  late  years  by  complaints  against  German  practices, 
but  of  which  our  own  first  experience  came  from  England  at 
the  close  of  the  War  of  1812.  It  will  be  recalled  that  the 
industries  of  the  United  States  had  expanded  greatly,  though 
only  temporarily  as  it  later  proved,  under  the  forcing  effects 
of  that  war  and  of  the  embargo  which  had  preceded  it. 
This  was  naturally  viewed  with  concern  by  British  manu- 
facturers and  statesmen,  and  the  result  was  an  attempt  to 
break  down  the  new  industries  after  the  peace  by  heavy 
shipments  of  goods  to  be  sold  at  any  price.  The  often- 
quoted  Parliament  speech  of  Brougham  dates  from  this 
period:  *'  It  is  even  worth  while  to  incur  a  loss  upon  the 
first  exportations,  in  order  by  the  glut  to  stifle  In  the  cradle 
these  rising  manufactures  In  the  United  States,  which  the 


THE  FACTORS  OF  WORLD  COMPETITION       321 

war  has  forced  into  existence,  contrary  to  the  natural  order 
of  things."  That  utterance,  so  useful  in  later  days  for 
American  protectionist  orators,  summarizes  very  clearly  the 
phase  of  dumping  to  which  all  nations  naturally  object,  when 
practised  on  themselves,  and  against  which  most  modern 
tariff  laws  provide  a  remedy  in  the  shape  of  some  anti- 
dumping clause. 

Of  both  these  phases  of  dumping  we  are  likely  to  hear 
even  more  in  the  years  to  come,  under  conditions  of  inten- 
sified competition.  Our  own  people  will  complain  that  we 
are  selling  goods  abroad  at  lower  prices  than  we  charge 
at  home,  and  the  foreigner  will  complain  that  we  are  doing 
It  in  order  to  kill  his  infant  industries.  And,  on  the  other 
hand,  our  manufacturers  in  some  of  the  newer  and  less 
firmly  based  lines,  will  certainly  have  at  times  unpleasant 
experiences  when  the  German  chemical  industries  attempt 
to  regain  what  was  once  a  practical  monopoly  of  the  world's 
markets.  It  will  be  in  some  sense  a  revival  of  the  happy 
days  when  the  Standard  Oil  Company  could  be  hunted  simul- 
taneously in  Germany  and  in  the  United  States  for  the  same 
offense,  both  countries  charging  that  it  was  selling  abroad 
cheaper  than  at  home. 

Factors  of  export  trade.  Recurring  to  the  factors  which 
aid  in  the  development  of  foreign  trade,  those  of  most  im- 
portance may  be  summarized  as  follows,  so  far  as  they  re- 
late to  the  export  of  manufactured  commodities. 

a.  An  industry  must  be  firmly  based,  with  a  good  home 
market,  so  that  the  exports  do  not  make  up  too  large  a 
fraction  of  the  total  trade.  Otherwise  we  should  be  in  the 
position  of  Belgium  and  Japan,  which  must  export  or  starve. 
Of  course  an  industry  enjoying  a  high  protective  tariff  at 
home  has  an  immense  advantage  in  the  export  trade,  for 
even  the  higher  wages  it  will  pay  do  not  ordinarily  counter- 
balance its  gains  in  other  ways. 

b.  The  industry  must  have  low  costs,  as  compared  with 
its  competitors,  on  at  least  the  fraction  of  the  product  which 


322  COAL,  IRON  AND  WAR 

3s  exported.  To  be  entirely  sound,  ample  supplies  of  cheap 
fuel  and  raw  materials  are  imperative.  A  country  import- 
ing either  or  both  can  not  make  heavy  staples  for  export, 
though  it  can,  as  in  the  case  of  France,  make  and  export 
more  highly  finished  goods.  On  this  account  the  coal  sup- 
ply of  a  country  is  a  fair  rough  index  to  the  position  it  can 
ultimately  attain  in  international  trade.  If  the  coal  supply 
is  large  and  cheap,  it  can  export  manufactured  goods  for 
all  types;  if  the  coal  supply  is  small,  it  must  export  highly 
finished  manufactures;  if  the  coal  and  labor  supplies  are 
both  scarce,  it  can  only  export  natural  productions  and  raw 
materials. 

c.  The  indirect  effect  of  fuel  supply  on  foreign  trade  Is 
enormous.  Cheap  fuel  and  adequate  bunkering  facilities 
mean  that  there  is  a  positive  inducement  for  even  neutral 
ships  to  stop  at  your  ports  on  a  long  voyage.  So  long  as 
coal  was  the  only  marine  fuel,  the  United  States  could 
have  readily  taken  the  lead  in  this  matter,  though  as  a  mat- 
ter of  fact  it  has  always  fallen  to  the  share  of  Great  Britain. 
With  the  adoption  of  fuel  oil  for  marine  use,  even  though 
this  adoption  will  not  go  as  far  as  popularly  supposed,  we 
will  be  at  a  great  and  increasing  disadvantage.  The  reason 
for  this  has  been  explained  in  an  earlier  chapter  on  petro- 
leum resources,  where  it  is  seen  that  the  United  States  is 
pretty  near  the  end  of  its  home  oil  supply.  Active  measures 
in  the  way  of  securing  extra-territorial  reserves  and  good 
bunkering  facilities  are  necessary  if  we  are  to  hold  any 
serious  fraction  of  the  world's  carrying  trade. 

d.  In  considering  international  trade,  we  must  not  too 
firmly  fix  attention  on  its  selling  phase,  but  must  bear  in 
mind  that  It  also  necessarily  implies  buying.  To  accept 
gold  payments  for  exports  is  not  economic  or  profitable  for 
the  exporting  country,  In  the  long  run,  though  It  may  be 
temporarily  necessary.  It  means,  for  one  thing,  that  your 
ships  are  coming  back  light.  Taking  securities,  whether 
private  or  government,  in  payment  for  exports  should  be 


THE  FACTORS  OF  WORLD  COMPETITION      323 

regarded  as  a  very  exceptional  and  temporary  arrangement, 
for  in  the  long  run  it  is  far  more  profitable  to  take  instead 
cargoes  of  foreign  produce.  One  of  the  difficulties  in  the 
way  of  establishing  cheap  trade  with  South  America  has 
arisen  from  the  fact  that  the  export  commodities  from  that 
continent  are  somewhat  difficult  to  handle  as  return  freights 
for  manufactured  goods. 

Foreign  exchange.  The  present  chaotic  condition  of 
foreign  exchange,  which  must  be  re-adjusted  in  some  fashion 
before  a  sound  American  export  trade  can  be  established, 
arises  from  the  action  of  three  factors,  one  of  which  has 
been  just  referred  to.  These  are  (i)  that  though  there  is 
currency  inflation  and  poor  government  credit  all  over  the 
world,  the  United  States  Is  not  so  badly  off  as  some  Euro- 
pean countries  in  these  respects,  so  that  there  is  a  real  reason 
why  the  foreign  currencies  should  exchange  at  somewhat 
less  than  their  pre-war  ratio.  (2)  there  is  actually  a 
large  debt  owing  the  United  States  on  balance,  for  its  ad- 
vances in  loans  and  for  excess  shipments  already  made,  and 
the  old  supply  of  American  securities  abroad  is  pretty  well 
cleaned  out,  so  that  it  can  not  be  drawn  on  to  repay  these 
advances.  The  two  factors  mentioned  are  serious,  and  it 
will  take  many  years  to  re-adjust  the  balance  in  these  re- 
spects, so  that  whatever  fraction  of  that  fall  in  exchange  is 
due  to  their  action  will  remain  for  some  time.  The  last 
factor  to  be  mentioned,  however,  is  (3)  absence  of  foreign 
products  to  balance  our  current  exports.  This  arises  from 
industrial  disorganization  abroad,  which  can  not  be  ex- 
pected to  continue  much  longer,  and  the  effects  of  this  par- 
ticular factor  may  fairly  be  expected  to  disappear  in  1920 
or  192 1  at  the  latest. 

If  foreign  countries  do  not  have  to  pay  debts  or  interest 
on  debts  already  contracted,  the  existing  exchange  situation 
is  not  seriously  to  their  disadvantage,  for  it  gives  them  the 
advantage  of  a  highly  protective  tariff,  ranging  from  20  to 
80  per  cent.,  directed  against  the  United  States  only,  and 


324  COAL,  IRON  AND  WAR 

this  without  creating  any  unpleasantness.  It  serves  auto- 
matically to  limit  imports  of  American  goods,  and  to  stimu- 
late the  sale  in  America  of  foreign  goodsf*  Extension  of 
credits  can  act  as  a  palliative  of  this  condition  but  nothing 
can  remove  it  until  Europe  gets  back  again  on  a  normal 
producing  basis. 

Trade  expansion.  There  is  an  unfortunate  tendency 
noticeable  in  current  discussions  of  the  export  question,  to 
ascribe  the  slow  development  of  American  foreign  trade, 
particularly  with  South  America,  to  the  sheer  stupidity  of 
American  manufacturers  and  especially  to  their  defective 
selling  methods.  This  appears  to  be  a  very  wrong  view  to 
take  of  the  case,  and  it  tends  to  disappear  when  we  consider 
how  foreign  trade  arises  and  the  factories  which  are  neces- 
sary for  its  development.  It  seems  clear  enough  that  in 
order  to  export  a  product,  it  must  be  something  which  the 
market  country  can  use,  and  it  must  be  something  which  you 
can  make  very  cheaply,  so  that  you  can  undersell  other  for- 
eign competitors.  Now  a  great  many  of  our  manufactured 
products  do  not  fulfill  these  two  conditions,  a  fact  which  is 
often  overlooked  by  enthusiastic  consuls.  By  strenuous  ef- 
forts we  can  persuade  the  Chinese  to  use  kerosene  and  ciga- 
rettes, but  you  can  not  easily  sell  alarm  clocks  to  an  Argen- 
tine cowboy,  or  imitation  coffee  in  Rio.  These  are  extreme 
^examples  of  course,  but  there  are  really  very  many  things 
which  are  almost  as  unusable  by  people  who  have  different 
ideas  of  life  and  comfort  from  Americans;  and  this  affects  a 
good  many  of  the  more  highly  finished  goods  which  we  use 
here  very  largely.  As  to  the  heavier  staples,  that  is  another 
question.  There  we  come  upon  the  matter  of  cost  of 
manufacture  plus  freight,  and  heretofore  Germany  and  Eng- 
land have  been  able  to  undersell  us  in  most  lines.  The 
greatest  gains  in  future  are  still  likely  to  be  along  the  lines 
in  which  we  have  specialized,  so  as  to  have  distinct  selling 
advantages;  such  as  agricultural  machinery,  electrical  goods, 
machine  tools,  etc. 


CHAPTER  XXV 

THE  FUTURE  OF  WORLD  COMPETITION 

Discussion  of  the  future  of  world  competition,  at  a  time 
when  the  peace  treaty  is  as  yet  unratified,  and  when  many  of 
its  future  effects  can  only  be  surmised,  presents  very  serious 
difficulties.  But  if  we  are  right  in  assuming  that  national 
industrial  and  political  development  is  to  a  very  large 
extent  influenced  and  limited  by  national  material  resources, 
we  may  come  to  certain  pretty  definite  conclusions  as  to  the 
future  course  of  affairs.  In  doing  this  the  subject  will  be 
taken  up  under  several  broad  geographic  divisions,  and  no 
attempt  will  be  made  to  discuss  the  countries  and  regions 
which  are  of  no  present  industrial  importance,  and  which 
give  little  hope  of  being  of  future  importance  either  as 
producers  of  manufactured  commodities  or  as  markets  for 
such  goods.  There  are  some  countries  which  are  unfor- 
tunate geographic  facts,  and  little  else. 

The  British  Empire 

The  British  Empire  is  still  the  most  important  trade  fac- 
tor in  the  world,  though  as  will  be  seen  later  there  seems 
to  be  reason  to  expect  considerable  change  in  the  relative 
importance  of  its  separate  parts. 

Great  Britain.  The  industrial  development  of  Great 
Britain  has  been  discussed  at  some  length  in  an  earlier  chap- 
ter of  this  volume,  and  her  recent  industrial  and  political 
experiences  are  too  well  known  to  need  even  reference  here. 
What  we  have  to  look  at  are  some  features  of  broader  im- 
portance, as  affecting  her  future  trade  relations. 

We  may  start  from  the  premise  that  the  commanding  in- 
ternational position  of  Great  Britain,  in  war  as  in  trade, 
was  due  to  the  fact  of  her  large,  accessible  and  cheap  coal 

225 


326  COAL,  IRON  AND  WAR 

supply;  and  to  the  further  fact  that  coal  came  to  be  used 
pretty  universally  as  locomotive  and  marine  fuel.  Manu- 
facturing was  cheaper  in  England  than  on  the  Continent, 
and  trade  followed  the  fuel.  The  advantages  up  to  around 
1880  were  unquestionable,  and  not  seriously  challenged,  in 
either  trade  or  war.  Since  that  date  new  factors  have 
entered  the  problem,  and  these  will  be  of  increasing  im- 
portance in  future. 

As  matters  stand  now,  Great  Britain  has  still  remaining 
much  coal,  but  it  is  less  accessible  and  cheap  than  formerly, 
while  meantime  there  have  been  vast  coal  developments  in 
Germany  and  the  United  States. 

Coupled  with  this  natural  factor,  which  could  not  be 
helped  in  any  way,  we  have  what  seems  to  be  generally  ac- 
cepted, in  Great  Britain  as  abroad,  as  being  a  very  serious 
deterioration  in  British  labor  efficiency.  This  is  not  a  racial 
question,  for  the  British  workman,  when  he  chooses  to  work, 
is  at  least  equal  to  others;  and  the  prevalence  of  drink  is  not 
a  reasonably  complete  explanation.  What  has  happened 
is  apparently  a  purely  social  phenomenon,  to  be  cured  only 
by  political  action,  and  the  leading  single  cause  is  perhaps 
the  extreme  concentration  of  land  ownership  in  the  British 
Isles.  In  Germany,  France  and  the  United  States  over  a 
third  of  the  population  is  still  engaged  in  agricultural  pur- 
suits, and  in  each  case  half  or  over  of  the  population 
own  at  least  a  little  land.  In  Great  Britain  it  has  been  a 
long  time  since  as  much  as  ten  per  cent,  of  the  population 
were  engaged  in  agriculture,  and  it  is  questionable  if  two 
per  cent,  are  landowners.  With  our  own  belief  in  the  valu- 
able energizing  effects  of  the  right  of  private  ownership,  it 
is  not  difficult  to  see  that  here  a  very  valuable  factor  of 
safety  against  labor  troubles  does  not  function  properly. 

In  any  case,  the  growing  slackness  of  labor  and  the  higher 
cost  of  coal  had  brought  Great  Britain,  in  the  years  im- 
mediately preceding  the  World  War,  into  a  position  of  rela- 
tive inferiority  in  world  competition,  as  compared  with  Ger-^ 


THE  FUTURE  OF  WORLD  COMPETITION      327 

many.  That  fact  explains  some  of  the  bitterness  with 
which  the  war  was  waged.  It  is  not  true,  however,  that  it 
was  the  cause  of  England's  entry  into  the  war,  as  is  so 
plausibly  suggested  by  German  sympathizers. 

Now  that  the  war  is  over,  the  coal  situation  remains  as 
before,  while  the  British  labor  attitude  seems  to  be  dis- 
tinctly worse.  It  is  to  be  hoped  that  political  wisdom  will 
find  some  way  for  curing  the  disease  of  which  this  is  a  symp- 
tom, without  at  the  same  time  destroying  all  the  existing 
social  structure  of  England.  Even  from  a  purely  selfish 
standpoint,  we  are  deeply  interested  in  the  result.  Re- 
garded either  as  a  competitor  or  as  an  ally.  Great  Britain  is 
by  all  odds  the  most  important  single  factor  in  American 
life,  and  her  political  development  is  perhaps  the  thing 
which  will  best  repay  our  attention. 

The  Dominions  Overseas.  Whatever  we  may  think  as 
to  the  future  of  distinctively  English  trade,  we  must  realize 
that  the  doubts  become  much  less  serious  when  we  pass 
from  consideration  of  the  home  country  to  the  Empire  as 
a  whole.  With  a  steadily  dwindling  fuel  supply,  the  Brit- 
ish Isles  will  never  again  be  so  overwhelmingly  important  as 
they  were  during  the  nineteenth  century;  but  on  the  other 
hand  we  see  that  in  the  Dominions  and  the  colonies  over- 
seas there  lie  the  means  for  renewing  the  ascendency  of  the 
Empire  as  a  whole. 

It  is  overlooked,  by  these  who  think  only  in  terms  of 
acreage  or  population,  that  in  Canada  and  Australia  there 
are  very  large  coal  supplies,  very  accessible  for  water  ship- 
ment; while  in  South  Africa  and  India  there  are  large  but 
less  important  deposits.  Add  to  this  the  English  interests, 
private  and  governmental,  in  the  oil  deposits  of  Persia, 
Burmah,  Baku,  Roumania  and  other  areas,  and  we  come 
to  have  some  idea  of  the  fuel  strength,  in  combination,  of 
the  British  Empire.  Of  the  areas  named,  eastern  Canada 
will  some  day  become  one  of  the  great  steel  exporters  of 
the  world;  and  both  South  Africa  and  Australia  seem  to 


328  COAL,  IRON  AND  WAR 

have  enough  Iron  ore,  in  addition  to  their  coal,  to  become 
,Jp»portant  industrial  factors  In  world  commerce. 
Y  The  Empire.  Considered  as  a  unit,  the  trading  and 
manufacturing  position  of  the  British  Empire  has  gained 
somewhat,  rather  than  lost,  through  the  occurrences  of  the 
past  five  years.  The  gain  is  not  sufficient  to  restore  its 
old  world  dominance  in  manufacturing,  but  it  revives  the 
shipping  and  trading  ascendency  which  for  a  time  seemed 
to  be  on  the  decline.  It  is  to  be  noted,  however  that  the 
period  of  oil  fuel  which  is  at  hand,  though  it  strengthens 
British  marine  leadership,  brings  in  its  train  certain  con- 
sequences of  political  type.  The  question  of  the  retention 
of  India,  which  once  could  have  been  discussed  on  the 
grounds  of  abstract  justice,  becomes  now  a  matter  of  im- 
perial poHcy,  since  India  forms  a  geographical  link  in  the 
vast  series  of  oil  deposits  which  will  be  for  a  time  the  most 
important  factor  in  the  trade  supremacy  of  the  Empire.        ) 

The  Rehabilitation  of  Germany 
In  current  discussions  of  the  future  of  Germany,  there 
IS  evident  a  very  serious  misconception  of  the  relative 
importance  of  the  different  factors  which  give  power  to  a 
nation.  And  there  is,  furthermore,  a  good  deal  of  misun- 
derstanding and  erroneous  statement  as  to  the  physical  and 
territorial  results  of  the  war.  In  order  to  arrive  at  any 
fair  approximation  to  the  probabilities  of  the  future,  we 
will  have  to  get  a  clear  idea  of  those  latter  features. 

Under  the  peace  treaty,  there  are  certain  consequences 
as  regards  coal  and  Iron  ore  supplies  which  are  definite  and 
sure;  and  others  which  are  not  so  clearly  defined,  because 
they  depend,  to  some  extent  at  least,  upon  the  later  action 
of  neighboring  states.  We  can,  however,  discuss  the  mat- 
ter with  some  approach  to  precision,  thanks  to  the  data  al- 
ready available  as  to  the  distribution  and  tonnage  of  coal 
and  iron-ore  reserves,  presented  In  part  In  Chapters  IX  and 
XL     For  our  present  purposes,  however,  some  of  the  ma- 


THE  FUTURE  OF  WORLD  COMPETITION       329 

terial  there  presented  must  be  taken  up  in  a  little  more  de-   y 
tail.  ^ 

The  iron  ore  situation.  As  regards  the  German  iron- 
ore  situation  to-day,  it  should  be  needless  to  say  that  it 
shows  a  very  sharp  reversal  from  that  of  19 13.  Before 
the  war  Germany  and  France  had  almost  equal  parts  of  the 
great  Lorraine  ore  field;  to-day  it  is  entirely  French,  since 
even  Luxemburg  has  asked  admission  to  a  French  custom 
union.  In  19 14  Germany  had  about  one-third  the  entire 
iron  ore  reserves  of  Europe;  to-day  she  retains  perhaps  a 
tenth  or  less.  For  any  future  iron  and  steel  developments 
she  must  now  rely  almost  entirely  on  imported  ore,  chiefly 
from  Sweden,  Newfoundland  or  France.  Such  imports  can 
doubtless  be  arranged,  but  they  will  increase  the  cost  of  steel 
manufacture  to  a  point  which,  in  all  probability,  will  put 
Germany  at  a  very  serious  disadvantage  as  compared  with 
her  old  competitors. 

There  is  the  further  possibility,  which  must  be  taken  in- 
deed as  almost  a  probability  that  in  future  the  Rhineland 
region  may  look  toward  France,  rather  than  Germany,  for 
its  trade  and  perhaps  also  its  political  relations.  There  are 
many  reasons  why  this  would  be  a  very  natural  result  of  the 
war  and  the  peace  treaty.  If  so,  a  large  part  of  the  more 
highly  finished  steel  manufacture  of  the  German  Empire 
would  be  in  reality  French  in  its  future  trade  status. 

The  coal  situation.  Germany  has  lost  two  thirds  or  more 
of  her  iron  ore  supply  by  the  war,  and  she  has  also  lost 
ground  as  regards  coal,  though  not  quite  so  seriously.  It 
is  with  regard  to  coal  reserve  that  the  adjustments  of  the 
treaty  are  uncertain.  So  far  as  they  can  be  stated  pre- 
cisely, we  may  say  that  France  receives  (in  Lorraine)  about 
one  third  of  the  Sarre  coal  field,  which  of  course  becomes 
an  integral  portion  of  the  Republic.  But  she  also  receives, 
in  trust  for  fifteen  years,  the  remainder  of  the  Sarre  field, 
and  since  there  is  to  be  a  plebiscite  at  the  end  of  this  period 
it  would  be  a  very  optimist  German  indeed  who  expects 


330  COAL,  IRON  AND  WAR 

that  it  will  again  become  German.  The  loss  here  amounts 
to  some  16,000  million  tons  of  good  coal.  This  does  not 
cripple  Germany,  but  it  doubles  the  known  coal  supplies  of 
France. 

On  the  other  side,  however,  there  is  a  far  more  serious 
possibility  of  loss,  for  it  seems  probable  that  the  great  coal 
fields  of  Silesia  go  to  one  or  more  of  the  newly  created 
states.  If  that  be  the  final  result,  Germany  will  have  lost 
in  all  some  200,000  million  tons,  or  about  half  her  known 
supply  of  19 14.  This  is  a  very  serious  loss  to  her  future 
manufacturing  ability,  and  does  not  seem  to  be  correctly 
appraised  in  the  views  now  held  as  to  rapid  rehabilitation. 
It  is  true  that  the  coal  retained  by  Germany  includes  her 
most  important  producing  field  —  that  of  Westphalia  — 
but  here  the  loss  of  the  Lorraine  iron  ore  operates  to  re- 
duce the  future  value  of  that  field.  1 

The  question  of  future  rank.  Summing  up  these  mat- 
ters, it  does  not  seem  likely  that  Germany  will  be  able  to 
regain  her  former  competitive  status,  even  under  the  most 
favorable  assumption  that  there  will  be  no  separatist  move- 
ment in  the  Rhine  Provinces.  Her  future  rank,  so  far  as 
to  manufacture  and  export  of  heavy  steel  products  is  con- 
cerned, will  probably  be  third  for  a  time  to  the  United  States 
and  England.  Even  this  Is  somewhat  uncertain,  for  two 
widely  different  reasons.  One  is  that  in  future  there  will 
probably  be  an  era  of  high  protective  tariffs  all  over  the 
world;  the  other  arises  from  the  fact  that,  under  favorable 
conditions,  the  manufactures  and  exports  of  the  Lorraine- 
Luxemburg  region  may  attain  greater  importance. 

The  manufacture  of  coal  tar  products  and  of  other  more 
highly  finished  goods  does  not,  however,  seem  to  have  been 
necessarily  affected  by  the  results  of  the  war,  and  along 
these  lines  we  may  expect  further  German  development.  It 
is  true  that  even  in  these  products  the  American  and  Eng- 
lish markets,  always  open  to  German  goods  before  the  war, 


THE  FUTURE  OF  WORLD  COMPETITION      331 

will  now  be  partly  or  entirely  shut  off  in  order  to  protect  the 
new  industries  which  have  sprung  up  during  the  war. 

As  to  the  reaction  of  such  a  restricted  prosperity  on  the 
German  political  and  social  structure,  there  are  reasons  for 
hoping  that  it  will  not  be  too  serious.  It  is  true  that  a 
socialized  republic  has  succeeded  an  Empire,  but  the 
Empire  had  gone  very  far  along  the  line  of  paternalism, 
in  the  protection  and  encouragement  of  industries.  The 
railroads,  many  coal  mines,  and  a  part  of  the  iron  ore  and 
potash  mines  were  government  owned  and  operated  for 
many  years;  and  It  Is  unlikely  that  the  republic  will  go  much 
further  In  the  direction  of  state  control.  The  fact  that  a 
third  of  the  German  population  is  still  engaged  In  agricul- 
tural pursuits  Is  of  course  a  restraining  Influence. 

The  Development  of  France  and  Belgium 

Apart  from  merely  geographic  considerations,  there  are 
reasons  for  considering  France  and  Belgium  together. 
Both  have  had  the  same  Immediate  difficulties,  arising  from 
the  destruction  along  the  frontier  and  the  consequent  tem- 
porary uselessness  of  their  old  coal  supplies;  both  share, 
though  to  unequal  extents.  In  the  re-adjustments  likely  to 
come  In  the  Lorraine-Rhine  region;  and  both  have  African 
colonies  as  very  valuable  assets  in  future  trade  development. 
It  Is  often  overlooked  that  France  has  the  second  largest 
colonial  empire  In  the  world,  approximating  In  area  to  the 
United  States.  The  bearing  of  this  factor  on  Belgian  and 
French  revival  of  trade  can  hardly  be  over-estimated,  and 
we  will  recur  to  It  later  In  discussing  the  place  of  Africa  in 
the  world's  trade. 

rThe  territorial  gains  made  by  France  during  the  war 
are  well  understood,  and  the  less  widely  appreciated  gains 
in  iron  ore  and  coal  reserves  have  been  already  noted,  In 
discussing  their  loss  by  Germany.  France  now  controls  the 
cheapest  iron  ore  supply  in  Europe  or  available  for  Euro- 


332  COAL,  IRON  AND  WAR 

pean  use.  The  tonnage  available  is  entirely  out  of  propor- 
tion to  the  development  of  the  French  iron  industry  before 
the  war,  or  indeed  to  the  coal  resources  which  France  had 
then  available.  The  former  condition  can  be  readily 
changed,  for  that  is  merely  a  matter  of  building  new  plants 
or  extending  old  ones.  But  the  coal  situation  is  still  a  per- 
plexing factor,  since  for  four  or  five  years  the  output  re- 
ceived from  the  Sarre  region  will  not  be  more  than  is  re- 
quired to  merely  replace  the  old  output  from  the  damaged 
field  of  Pas  de  Calais-Nord.  The  coal  supply  will  still  be 
the  limiting  factor  in  French  industrial  development,  as  it 
has  been  for  a  long  time  in  the  past. 

y  The  end  result  of  this  complex  industrial  situation  seems 
to  depend  in  large  part  upon  the  political  developments,  dur- 
ing the  next  year  or  two,  in  the  territories  along  the  Rhine. 
If  these  decide  to  enter  into  closer  commercial  and  political 
relations  with  France,  then  the  new  customs  union  will  be 
the  inheritor  of  most  of  the  old  German  export  trade  in 
heavy  products.  Otherwise,  the  change  in  control  of  Lor- 
raine, though  a  very  serious  loss  indeed  to  German  trade, 
does  not  imply  a  corresponding  gain  to  France,  so  far  as 
industry  is  concerned.  /"^^ 

So  far  as  we  can  sum  up  the  matter  now,^  France  Is  still 
likely  to  remain  a  manufacturer  and  exporter  of  highly 
finished  goods,  rather  than  of  heavy  staples.  And  her  geo- 
graphic and  political  destiny  seems  to  look  toward  the  Medi- 
terranean and  Africa,  rather  than  toward  the  Atlantic. 
Believing,  as  we  do,  that  the  next  great  impetus  to  world- 
wide trade  activity  is  to  come  from  the  development  of 
Africa,  this  is  by  no  means  a  gloomy  outlook  for  the  Re- 
public. 

The  Russian  States 

Whatever  may  have  been  our  views  as  to  the  Russian  ad- 
venture, it  is  over  now,  and  we  can  get  some  idea  of  what 
is  likely  to  come  of  Russia  when  left  to  itself.  The  chief 
developments  have  been  the  creation  of  a  soviet  state  in  the 


THE  FUTURE  OF  WORLD  COMPETITION      333 

heart  of  European  Russia,  of  a  more  or  less  military  despot- 
ism in  Siberia,  and  the  creation  of  a  fringe  of  republics 
along  the  European  frontiers  of  the  old  Empire.  To  what 
extent  any  of  these  conditions  are  permanent  is  a  question 
which  no  one  seriously  attempts  to  answer  from  the  evi- 
dence, though  very  many  absolutely  cocksure  answers  can 
be  obtained  based  solely  on  hopes  or  fears.  A  number  of 
the  little  fragmentary  governments  which  sprung  up  do  not 
seem  to  be  of  permanent  promise,  though  the  Siberian  gov- 
ernment may  take  on  a  more  permanent  form,  looking  east- 
ward rather  than  westward  for  its  markets.  .^^-^'^ 

In  this  state  of  disorganization  and  uncertainty,  the  only 
thing  that  seems  clear  is  that  Russia  can  not  become  a 
serious  factor  in  the  world's  industry  for  very  many  years 
to  come.  Eler  possibilities  in  this  line  were  always  over- 
estimated, even  under  the  most  favorable  conditions,  for 
her  coal  reserves  are  very  definitely  smaller  than  those  of 
England,  Germany,  America  and  other  competitors.  Now, 
with  the  chief  coal  supply  in  the  hands  of  one  new  republic 
and  the  main  trading  districts  in  the  hands  of  others,  the 
chance  of  any  great  manufacturing  progress  seems  too 
small  to  consider  here.  ^ 

As  in  the  past,  the  various  Russian  states  will  export 
grain,  oil,  lumber,  manganese  ore  and  other  raw  materials; 
and  they  will  import  the  bulk  of  their  manufactured  re- 
quirements. This  condition  will  not  be  a  consequence  of 
sovietism;  it  is  caused  by  having  too  little  fuel  and  iroiv  ore 
supplies,  and  having  them  in  the  wrong  places.  The  Rus- 
sian myth  has  been  carefully  inculcated,  largely  for  political 
reasons,  for  twenty  years  or  more,  but  there  is  no  reason 
why  the  facts  should  not  be  faced  now.  The  Russian 
Empire  at  its  best  had  only  one  coal  field  that  was  worth 
mentioning  so  far  as  location  and  reserve  tonnage  was 
concerned;  this  was  the  Donetz  basin.  And  this  is  esti- 
mated to  contain  a  tonnage,  not  comparable  to  that  of  Eng- 
land or  Germany,  but  about  equal  to  that  of  Oklahoma, 


334  COAL,  IRON  AND  WAR 

or  half  as  much  as  Kentucky.  As  for  the  Siberian  fields, 
there  was  not  the  remotest  possibility  that  they  could  affect 
the  manufactures  or  trade  of  the  world  for  the  next  fifty 
years,  if  then. 

Given  a  stable  and  honest  government,  the  latter  of  which 
Russia  has  never  had,  an  educational  system,  and  some 
reasonable  approach  to  sobriety,  Russia  will  at  some  time 
become  a  very  prosperous  country,  but  it  will  never  become 
a  manufacturing  country  of  the  class  of  England,  America, 
Canada,  China  or  France.  Its  future  is  more  likely  to  be 
like  that  of  Argentina,  though  it  is  possible  enough  that  the 
South  American  republic  will  in  the  long  run  be  the  more 
important  of  the  two. 

The  Development  of  Africa 

When  we  followed  out  the  industrial  history  of  various 
countries  in  the  early  part  of  this  book,  and  again  when  we 
came  to  study  the  causes  of  trade  activity,  we  were  brought 
up  at  Intervals  against  the  fact  that  world-wide  periods  of 
industrial  development  arise,  in  large  part,  from  geographic 
discovery  and  colonial  development.  We  saw  the  effects  In 
turn  of  the  discovery  of  the  Americas,  of  the  acquisition  of 
Britain's  colonial  empire,  of  the  freedom  of  South  America, 
and  of  the  westward  growth  of  our  own  country.  These 
periods  of  rapid  extension  of  markets,  when  they  followed 
great  wars,  went  far  toward  repairing  the  losses  of  those 
wars,  or  at  least  toward  postponing  the  day  of  payment. 

Now,  European  rivalries  in  Africa  went  far  toward 
causing  the  recent  war,  for  since  1895  or  thereabout  there 
was  a  very  rapid  expansion  of  colonies  all  over  that  conti- 
nent. To-day  we  may  say,  with  rough  accuracy,  that  one 
third  of  Africa  belongs  to  France,  and  almost  two-thirds  to 
England. 

The  location  of  Africa  with  respect  to  Europe,  the  favor- 
able climatic  conditions  of  large  regions,  and  the  known 
mineral  and  other  resources  of  the  continent  all  combined 


THE  FUTURE  OF  WORLD  COMPETITION      335 

give  reason  to  hope  that  in  the  very  near  future  there  will 
be  a  very  intensive  development  of  these  resources,  and  a 
very  rapid  growth  in  the  trade  importance  of  that  continent. 
As  an  inciting  cause  to  a  period  of  trade  activity,  Africa 
has  thus  great  interest  for  us  at  the  present  day,  when  there 
seems  to  be  ahead  of  us  a  definite  slowing  down  in  our  cur- 
rent period  of  active  progress.  But  as  a  future  home  for 
large  aggregations  of  purely  European  type  it  also  offers 
great  possibilities,  in  two  widely  separated  regions.  Of 
these,  South  Africa  has  the  advantage  that,  in  future,  it 
may  become  independent  in  the  matter  of  coal  and  iron  sup- 
ply, since  it  has  sufficient  raw  materials  to  be  considered  a 
possible  producer,  though  hardly  a  heavy  exporter  of  such 
products. 

The  Future  of  South  America 

It  has  already  been  noted  that  South  America  is  by  all 
means  the  most  deficient  in  coal  supplies  of  all  the  continents, 
and  this  fact  must  inevitably  affect  the  course  of  its  com- 
mercial evolution.  Not  even  the  occurrence  of  petroleum 
supplies  will  have  the  same  effect  in  developing  large  local 
industries  as  does  coal,  because  oil  can  be  too  readily  shipped 
elsewhere  and  its  cost  is  normally  higher  than  that  of  coal 
when  used  as  a  manufacturing  fuel. 

For  our  present  purpose,  however,  we  may  go  further 
than  this  in  the  way  of  discussion,  for  different  countries 
or  groups  of  countries  stand  in  very  different  relations  so 
far  as  their  probable  future  development  is  concerned. 
They  will  be  taken  up,  not  in  order  of  importance,  but  in 
order  of  nearness  to  the  United  States. 

We  have,  first  of  all,  a  group  along  the  north  or  Carib- 
bean coast  of  South  America,  from  Colombia  through  Vene- 
zuela to  the  three  Guianas.  This  group,  aside  from  any 
other  resources  that  it  may  have,  has  large  known  and  prob- 
able petroleum  deposits,  some  of  which  are  now  under  de- 
velopment by  British  and  American  companies.     This  oil 


336  COAL,  IRON  AND  WAR 

will  add  to  the  wealth  of  the  producing  country  only  slightly, 
for  it  will  not  be  used  in  any  large  way  as  local  fuel. 
Further,  there  are  in  the  same  regions  large  deposits  of 
iron  ore,  of  the  type  which  makes  important  the  north  coast 
of  Cuba,  and  perhaps  equally  large  deposits  of  bauxite,  or 
aluminum  ore.  These  ores  may  in  time  be  an  important 
resource,  but  they  too,  like  the  oil,  will  be  exported  in  a 
crude  state.  So  far  as  can  be  seen  there  is  little  hope  of 
serious  local  manufactures,  for  the  coal  deposits  which  do 
occur  in  Colombia  are  not  located  well  for  becoming  factors 
in  trade. 

The  countries  on  the  west  coast  have  little  prospects  of 
becoming  manufacturers  until  we  reach  Chile.  Here  there 
are  coal  deposits  of  some  size,  largely  owned  by  German 
interests,  and  used  among  other  purposes  as  marine  fuel. 
The  coal  is  not  remarkably  good  but  it  will  burn.  It  may 
be  that  some  developments  along  manufacturing  lines  may 
be  looked  for,  using  this  coal  as  a  basis.  Otherwise  the 
only  possibilities  along  the  west  coast  are  water  power  and 
the  Peruvian  oil  deposits. 

With  Argentina  we  reach  one  of  the  most  promising 
countries  in  the  world,  so  far  as  future  is  concerned,  but 
even  here  the  chances  are  against  very  heavy  manufacturing 
developments.  The  Rivadavia  and  other  oil  fields  will 
have  to  become  more  productive,  or  else  foreign  coal  will 
have  to  enter  cheaper,  before  much  can  be  done  in  the  way 
of  mills  and  factories  for  more  than  very  local  use.  But 
the  natural  resources  of  the  country  are  so  great,  and  its 
population  differs  so  widely  from  that  of  any  other  South 
American  country,  that  it  would  be  rash  to  say  definitely 
that  no  large  manufacturing  industries  will  arise.  We  are 
facing  here  the  development  of  a  people  of  pure  European 
types,  with  no  negro  or  Indian  admixture.  The  three 
elements  of  this  population  now  are  Spaniards,  Basques  and 
Italians.  The  other  European  influences  of  which  we  hear 
at  intervals   are  not  in   any  way  serious.     There   are   In 


THE  FUTURE  OF  WORLD  COMPETITION      337 

fact  more  Welshmen  and  Boers  settled  in  Argentina  than 
there  are  Germans,  French  and  English  together. 

The  two  little  republics  adjoining  are  of  interest  because 
Uruguay  is  the  soundest  financial  thing  in  South  America, 
while  Paraguay  may  furnish  the  first  real  test  to  our  Monroe 
Doctrine.  The  United  States  may  soon  have  to  decide 
whether  a  foreign  colony  settled  with  the  consent  of  the 
republic,  is  likely  to  become  a  menace  to  its  future  indepen- 
dence. 

With  regard  to  Brazil  we  have  to  deal  with  one  of  the 
largest  countries  of  the  world  and  one  that  is  quite  largely 
populated.  But  just  as  in  the  case  of  Argentina  we  will 
have  a  pure  white  race,  so  in  Brazil  we  will  apparently 
have  the  most  important  mestizo  republic  in  the  world. 
There  are  few  inhabitants  indeed  who  are  of  white  blood, 
as  that  term  would  be  used  by  an  American.  The  extreme 
southern  provinces  have  some  chance  of  becoming  settled  by 
Europeans,  since  the  climate  is  good  and  the  resources  great, 
but  the  war  may  have  put  an  end  to  what  seemed  to  be  a  very 
promising  German  colony.  So  far  as  fuel  is  concerned 
Brazil  is  practically  coal-less.  It  has  one  of  the  largest 
tonnages  of  iron  ore  found  anywhere  in  the  world,  however, 
and  from  time  to  time  efforts  are  made  to  secure  govern- 
ment subsidies  for  iron  manufacture.  Nothing  of  serious 
export  importance  could  possibly  grow  out  of  these  at- 
tempts; but  there  is  no  question  but  that  cotton  and  other 
textile  manufactures  could  be  developed  by  the  use  of  the 
very  well-located  water  powers  which  are  so  abundant  near 
the  coast. 

On  looking  back  over  this  summary  we  can  see  that, 
except  in  a  very  few  special  cases,  no  country  in  South  Amer- 
ica is  at  all  likely  to  develop  serious  home  industries.  The 
continent  will  remain  largely  an  exporter  of  vegetable, 
animal  and  mineral  raw  materials  and  a  good  market  for 
many  lines  of  manufactured  goods. 


33^  COAL,  IRON  AND  WAR 

The  Prospects  of  Australia 

Australia,  with  its  dependent  islands  acquired  during  the 
war  and  earlier,  has  excellent  prospects  for  manufacturing 
development.  These  center  about  the  coal  deposits  in  New 
South  Wales  as  well  as  those  in  Queensland,  which  together 
may  amount  to  twice  as  much  as  the  widely  advertised  coal 
deposits  of  Russia.  There  are  also  iron  ore  deposits  of 
respectable  though  not  enormous  tonnage  known  to  exist, 
and  there  seems  to  be  no  reason  why  the  Commonwealth 
should  not  in  time,  aided  by  a  protective  tariff,  supply  it- 
self with  practically  all  its  requirements  of  manufactured 
goods. 

The  necessity  for  a  protective  tariff,  and  a  high  one  at 
that,  is  obvious  when  we  consider  what  competition  is  likely 
to  come  from  Asia.  Further,  in  both  Australia  and  New 
Zealand  industrial  conditions  have  been  placed,  by  legisla- 
tion, on  a  very  high  level;  and  free  competition  from 
laborers  of  other  races  would  destroy  the  high  average  of 
well-being  which  seems  to  be  characteristic  of  this  very  ad- 
vanced member  of  the  Empire. 

On  the  other  hand,  this  very  high  level  of  wages  and 
general  well-being  will  of  itself  tend  to  prevent  Australian 
competition  outside  of  the  limits  of  the  Commonwealth. 
The  coal  deposits  of  the  region,  though  large  enough  to 
suffice  for  the  needs  of  domestic  manufacture,  are  not  so 
immense  as  to  demand  exploitation  for  a  great  export  trade. 
Further,  unless  all  signs  fail,  the  expansion  in  Australian 
population  will,  for  many  years  to  come,  create  a  very  much 
larger  domestic  market  for  Australian  manufactured  prod- 
ucts. The  country  is,  in  fact,  in  these  respects  much  in 
the  same  favorable  position  as  was  the  United  States  dur- 
ing the  years  up  to  1900  or  so,  when  there  was  no  serious 
need  to  consider  foreign  trade  as  an  outlet  for  our  own 
manufactured  commodities. 


THE  FUTURE  OF  WORLD  COMPETITION       339 

The  Competition  of  Asia 

At  this  point  we  reach  consideration  of  the  factors  which 
are  likely  to  have  by  far  the  most  serious  effects  on  the  in- 
dustry of  the  world  during  the  decades  to  come.  In  Europe 
we  have  been  dealing  largely  with  the  past,  but  the  new 
Asia  is  of  the  future. 

The  future  reactions  of  Asiatic  conditions  on  western 
trade  and  life  will  arise  in  several  quite  distinct  ways,  all 
which  have  suggested  themselves  at  earlier  stages  of  our 
study,  and  two  of  which  require  further  consideration  here. 
We  have,  to  clear  up  the  less  important  matters  at  the  outset, 
two  serious  problems  arising  from  conditions  in  central  and 
western  Asia.  These  are  connected  with  the  future  indus- 
trial, political  and  social  development  of  Siberia;  and  with 
the  same  features  of  the  future  relations  of  India  and 
Persia.  There  is  no  intention  of  minimizing  the  serious- 
ness of  either  of  these  problems,  or  the  possibility  that  in 
the  long  run  they  may  react  on  world  affairs,  but  at  the 
moment  they  may  be  treated  as  domestic  problems  of  Russia 
and  England,  with  which  we  have  nothing  to  do.  With 
regard  to  the  other  two  matters,  however,  we  can  not  drop 
the  questions  so  lightly.  The  future  course  of  Japanese  and 
Chinese  development  are  matters  which  concern  us  very  im- 
mediately and  very  directly. 

In  discussing  the  future  of  the  Mongolian  portion  of 
Asia,  it  is  very  difficult  to  avoid  falling  into  one  of  the  two 
errors  which  are  at  hand.  But  if  we  are  to  reach  con- 
clusions of  any  real  value  we  must  not  accept  too  seriously 
the  two  widely  differing  theories  which  are  so  often  offered 
as  ultimate  bases  of  thought  on  these  subjects.  The  extreme 
internationalist  will  tell  you,  for  example,  that  there  are  no 
serious  differences  in  the  average  intellectual  ability  of  dif- 
ferent races  of  men,  a  statement  which  is  probably  true; 
but  from  this  he  will  go  on  to  assume  that  two  races  are 
likely  to  think  and  act  alike,  which  is  equally  untrue.     On 


340  COAL,  IRON  AND  WAR 

the  other  hand,  the  kind  of  man  who  a  hundred  years  ago 
would  have  attributed  English  development  to  the  innate 
superiority  of  the  British  laborer  or  employer,  will  to-day 
unhesitatingly  pass  over  the  question  of  Asiatic  competition 
by  saying  that  the  lower  races  can  never  effectively  com- 
pete with  those  of  assumed  higher  type,  except  through 
sheer  acceptance  of  a  lower  hving  standard.  This,  like 
the  internatlonahst's  views,  is  not  entirely  false,  and  em- 
bodies one  of  the  half-truths  which  are  so  easy  to  pass 
off  as  entire  truths.  It  is  true  that  Oriental  competition 
in  the  past  has  depended  largely  upon  the  existence  of  a 
lower  living  standard  and  lower  labor  costs;  it  is  not 
true  that  the  future  danger  to  us  lies  along  those  lines. 
Low  living  standards  and  low  labor  costs  will  both  dis- 
appear In  the  East  exactly  in  proportion  as  industrialism 
progresses. 

Further,  we  must  keep  in  mind  that  we  are  not  merely 
speaking  of  a  vague  Yellow  Peril  considered  chiefly  as  a 
military  matter.  It  is  true  that  there  may  be  war  between 
Japan  and  the  United  States  or  Australia,  because  these 
three  nations  have  individual  aims  which  It  Is  hard  to  satisfy 
peacefully.  That  war  would  be  regrettable,  but  not  serious. 
The  thing  that  Europe,  and  to  a  lesser  extent  the  United 
States,  has  to  fear  is  not  war,  but  industrial  competition. 
This  is  inevitable,  and  it  will  be  very  serious  Indeed  for 
Europe.  Because,  as  the  matter  was  phrased  ^  some  years 
ago,  before  the  World  War  had  entered  to  distort  judg- 
ment, "  When  the  East  meets  tjie  West  in  final  conflict, 
wherever  and  whenever  that  conflict  may  take  place,  it  will 
be  a  case  of  full  bunkers  against  exhausted  ones;  and  no 
amount  of  courage  or  Ingenuity  will  make  up  for  deficiencies 
in  coal  supply."  In  an  earlier  chapter  we  have  come  to 
some  Idea  as  to  how  far  these  deficiencies  exist  in  Europe; 
we  may  now  see  just  what  the  Orient  can  place  against  them. 

^  Eckel,  E.  C.    "Iron  Ores,"  pages  405-406.     New  York,  1914. 


THE  FUTURE  OF  WORLD  COMPETITION      341 

And  we  shall  find  that  the  nation  of  which  we  talk  most 
frequently  in  this  connection  is  not  the  one  whose  competi- 
tion will  be  most  serious. 

The  status  of  Japan.  The  rapid  rise  of  Japan  in  In- 
dustrial and  consequently  in  military  power  has  caused 
general  over-estimation  of  the  real  strength  of  her  position, 
and  of  her  probable  future  status  as  a  competitor.  This  is 
brought  out  clearly  enough  when  we  come  to  take  account 
of  the  natural  resources  upon  which  any  large  or  enduring 
power  must  be  based. 

The  known  coal  reserves  of  Japan  have  been  estimated  at 
some   8000  million  tons.     For  comparison,  we  may  note  /- 

that  this  is  a  little  less  than  is  credited  to  Spain.  It  com---"^ 
pares  further  with  a  reserve  of  2,000,000  million  tons  in  the 
United  States,  with  some  200,000  million  tons  remaining 
to  the  German  Republic;  and  with  190,000  millions  credited 
to  the  British  Isles.  Though  sufficient  for  current  Japanese 
uses,  it  does  not  seem  to  justify,  either  in  quality  or  quantity, 
any  hope  that  it  will  be  the  basis  of  a  very  extensive  export 
trade,  either  in  coal  itself  or  in  heavy  manufactured  com- 
modities. 

This  position  is  strengthened  when  we  consider  the  iron 
ore  resources  of  Japan,  which  are  very  slight  indeed.  The 
Director  of  the  Japanese  Geological  Survey  placed  them 
at  some  56  million  tons,  or  somewhat  less  than  the  amount 
which  we  bring  down  each  year  from  the  Lake  Superior 
district.  Korea,  which  may  be  considered  now  as  an  inte- 
gral part  of  Japan,  does  not  add  appreciably  to  either  the 
coal  or  the  iron  ore  reserves.  Under  these  conditions, 
whatever  we  may  think  of  the  future  development  of  Japan, 
there  is  obviously  no  chance  that  it  can  attain  rank  as  a 
competitor  along  with  Germany,  England,  Canada,  France,  ^ 
South  Africa  or  Australia. 

This  conclusion  is  strengthened  by  the  results  of  the  war. 
Financially,  Japan  emerged  from  the  World  War  in  ex- 


342  COAL,  IRON  AND  WAR 

cellent  condition,  being  the  only  government,  so  far  as 
known,  which  was  actually  able  to  reduce  its  bond  issues 
during  the  conflict.  But  industrially  and  socially  the  posi- 
tion seems  to  be  far  less  sound.  Perhaps  we  can  see  this 
more  clearly  if  we  assume  that  at  the  moment  Japan  is  in 
the  same  economic  stage  which  Britain  had  reached  during 
the  Napoleonic  wars.  It  has  an  over-developed  industrial- 
ism, due  to  the  fact  that  for  years  its  normal  competitors 
have  been  otherwise  engaged.  It  must  now  find  markets 
for  a  heavy  over-load  of  commodities.  Failing  this,  there 
will  be  extensive  unemployment  and  social  unrest.  In  the 
case  of  Great  Britain  both  these  conditions  appeared  from 
1 8 15  to  1825,  but  England  was  ultimately  saved  because 
in  the  long  run  it  proved  that  she  had  the  cheapest  and 
best  coal  supply  in  Europe,  so  that  after  a  temporary  pros- 
tration her  industries  were  enabled  to  take  on  renewed 
growth.  Japan  does  not  seem  to  be  in  this  fortunate  posi- 
tion as  regards  domestic  supplies  of  raw  materials.  This 
implies  that  in  future  she  must  either  secure  ample  coal 
and  iron  supplies  somewhere,  or  find  an  outlet  for  surplus 
population.  The  first  means  the  acquisition  of  Chinese  ter- 
ritory; the  second  might  mean  difficulties  with  Australia 
and,  to  a  lesser  degree,  with  the  United  States.  It  is  be- 
cause these  economic  conditions  are  so  very  serious  that 
the  chances  of  war  seem  serious  also.  In  the  following 
chapter  we  may  come  again  to  this  matter,  in  another  con- 
nection. Meantime  we  may  take  up  another  and  far  more 
troubling  phase  of  the  Asiatic  problem. 

The  development  of  China.  In  passing  from  Japan  to 
China,  we  pass  from  a  country  that  has  experienced  per- 
haps the  maximum  of  its  local  development  to  one  whose 
material  bases  for  future  growth  are  so  vast  that  we  may 
fairly  expect  industrial  development  of  very  remarkable 
extent.  This  development  will  not  necessarily  require 
cheap  labor,  though  in  its  earliest  phases  it  will  have  very 
cheap  labor  to  aid  it.     But  its  real  strength  will  lie  in  the 


THE  FUTURE  OF  WORLD  COMPETITION       343 

possession  of  great  and  easily  worked  coals,  of  very  high 
grade. 

As  regards  the  question  of  tonnage,  we  may  note  that 
China  is  credited  with  containing  high-grade  coal  reserves 
amounting  to  about  1,000,000  millions  of  tons.  This 
quantity  is  about  half  the  American  tonnage;  but  it  is  five 
times  as  much  as  still  remains  to  the  German  Republic,, 
and  six  times  as  much  as  is  left  in  the  British  Isles.  For 
other  comparisons,  the  Chinese  total  is  one  hundred  and 
fifty  times  as  great  as  that  of  Japan,  and  about  eight  or 
ten  times  as  large  as  that  of  the  Russian  Empire  at  the  time 
of  its  greatest  extent.  As  regards  grade  of  coal,  we  may 
further  note  that  only  high-grade  coals  are  included  in 
these  estimates,  and  that  almost  half  the  Chinese  tonnage 
is  supposed  to  be  anthracite. 

A  few  words  on  the  geographic  distribution  of  the  Chi- 
nese coals  may  serve  to  throw  light  on  current  political 
disputes.  There  are  many  coal  areas  in  China,  but  the 
bulk  of  the  tonnage  occurs  in  one  or  two  very  large  fields. 
One  of  these,  in  north  China,  embraces  most  of  the  prov- 
ince of  Shansi,  with  portions  of  Chihli  and  Honan;  and  is 
credited  with  some  750,000  million  tons,  or  three  fourths 
of  the  Chinese  total.  The  other  large  field,  in  south  China, 
covers  much  of  the  provinces  of  Yunnan,  Kueichou, 
Szechuan,  with  adjoining  areas,  and  contains  over  200,000 
million  tons. 

The  province  of  Shantung,  in  an  isolated  field  contains 
about  as  much  coal  as  all  of  Japan,  and  incidentally  fur- 
nishes one  of  the  best  routes  in  to  the  great  Shansi  coal- 
field. It  also  yields  at  present  about  ten  per  cent,  of  the 
total  coal  output  of  China,  which  for  the  years  immediately 
before  the  war  had  risen  to  almost  twenty  million  tons. 

During  the  later  days  of  the  Empire,  a  steel  works  was 
built  at  Hanyang,  supposedly  at  government  expense  as 
a  government  enterprise.  It  seems  to  have  passed  later 
into  foreign,  nominally  private,  control.      Its  output  of  iron 


344  COAL,  IRON  AND  WAR 

was  approximately  250,000  tons  annually,  somewhat  greater 
than  the  total  reported  output  of  Japan.  There  seems 
to  be  some  reason  to  believe  that  the  Hanyang  works  could 
even  now,  if  they  had  any  surplus  for  export,  lay  down 
finished  steel  products  in  San  Francisco  more  cheaply  than 
could  any  American  steel  works. 

Under  these  conditions  as  to  fuel  supply,  and  the  known 
existing  status  of  the  Chinese  labor  market,  there  seems 
to  be  no  necessity  for  arguing  at  length  that  Chinese  com- 
petition with  American  and  European  mills  would  be  pos- 
sible. That  is  clear  enough  without  discussion.  The 
matter  of  real  interest  is  not  as  to  the  fact,  but  as  to  the 
date  of  its  arrival;  and  In  this  we  can  have  little  to  guide 
us.  What  we  do  know  now,  however.  Is  that  industrial 
development  can  take  place  very  rapidly  Indeed,  If  natural 
resources  and  labor  are  available  and  if  capital  Is  supplied. 
There  is  no  reason  to  expect  the  growth  of  the  Chinese  steel 
and  other  industries  to  be  very  slow,  provided  they  are 
undertaken  at  all.  There  would  be  no  physical  or  technical 
obstacle,  capital  being  supplied,  that  would  prevent  China 
attaining  sixth  or  seventh  place  among  the  Iron  and  steel 
producing  countries  of  the  world  within  ten  years  after 
the  development  was  started;  and  to  reach  a  higher  rank 
soon  after  that.  Building  up  a  modern  industry  Is  very 
quickly  done  In  these  days,  If  there  are  the  materials  to 
work  on  and  the  money  to  start  the  work.  So  that  if 
the  Impetus  to  Chinese  industrial  development  comes,  from 
any  source,  we  may  expect  very  rapid  growth  to  follow  In 
the  steel  Industry.  With  regard  to  such  things  as  the 
textile  industries,  it  is  probable  that  the  growth  could  be 
even  more  rapid,  for  they  do  not  require  the  extensive 
and  relatively  slow  mine  development  that  is  necessary  as 
a  basis  for  iron  and  steel  manufactures. 

We  may  therefore  take  It  for  granted  that  the  chief  In- 
dustrial features  of  the  next  two  or  three  decades  may 
easily  be  the  growth  of  Chinese  industrialism;  and  that  In 


THE  FUTURE  OF  WORLD  COMPETITION       345 

the  form  which  this  growth  takes,  and  the  markets  it 
affects,  may  lie  the  future  of  peace  or  war  for  the  world. 
In  so  far  as  Chinese  manufactures  are  marketed  in  China 
itself,  and  aid  in  the  development  of  that  country,  there 
will  be  involved  merely  a  somewhat  narrower  market  for 
European  and  American  goods.  But  if  industries  are  built 
up  in  China  chiefly  for  the  export  trade  —  and  this  might 
readily  occur  in  an  industrial  development  fostered  or  con- 
trolled from  the  outside,  the  consequences  would  be  far 
more  serious.  In  their  worst  form  they  would  bear  most 
heavily  on  Europe,  whose  coal  and  other  raw  material  sup- 
plies are  not  excessive ;  but  at  some  stage  of  the  development 
American  industries  would  feel  the  weight  of  Chinese  com- 
petition. 

In  either  case  the  European  and  American  working 
classes  will  suffer  from  the  economic  pressure  exerted  by 
the  new  industrial  nation;  and  as  this  pressure  becomes 
more  and  more  serious  we  may  expect  to  have  various 
solutions  offered  for  lessening  the  strain.  We  come  very 
naturally,  therefore,  to  the  subject  of  our  next  chapter  — 
Industrialism  and  War. 


CHAPTER  XXVI 
INDUSTRIALISM  AND  WAR 

It  has  been  seen,  in  preceding  chapters,  that  we  are  likely 
to  pass  soon  from  our  present  period  of  very  high  prices 
into  a  long  period  during  which  prices  and  profits  tend 
to  fall  off  gradually,  unless  some  new  factor  enters  to  re- 
tard or  accelerate  the  natural  tendency.  Now  a  fall  of 
prices,  in  itself,  is  not  a  necessarily  serious  matter,  par- 
ticularly if  it  takes  place  gradually,  for  since  wages  do 
not  tend  to  fall  quite  as  fast  as  commodity  prices,  the  labor- 
ing classes  will  attain  a  relatively  higher  degree  of  comfort. 
And  even  a  fall  in  the  rate  of  profit,  per  ton  of  commodity, 
does  not  discourage  capital,  so  long  as  more  tons  of  com- 
modity can  be  marketed.  It  is  only  when  a  fall  in  prices 
comes  about  because  an  existing  market  is  suddenly  re- 
stricted, for  one  reason  or  another,  that  it  has  a  serious 
influence  on  the  fortunes  of  all  the  community,  because  in 
that  case  the  price  decrease  will  cause  unemployment  and 
decrease  in  wages,  while  the  narrowed  market  will  cause 
decrease  in  the  total  profits,  not  merely  In  the  profits  per  ton. 
If  then  we  have  such  a  narrowing  of  the  market,  we  have 
a  condition  which  bears  heavily  on  all  classes,  and  one  for 
which  all  classes  together  will  seek  a  remedy.  It  is  this 
universality  of  economic  motives  that  makes  them  so  power- 
ful and  that  gives  serious  importance  to  the  subject  of  the 
present  chapter. 

In  all  of  the  earlier  discussion,  we  have  treated  peace 
as  being  the  normal  state  during  industrial  development, 
and  war  as  being  an  unfortunate  accident,  not  casually  re- 
lated to  the  industrial  growth.  That  mode  of  treatment 
has  certain  advantages,  since  it  frees  the  discussion  from 
the  danger  of  nationalist  or  racial  bias,  but  it  has  also  its 

346 


INDUSTRIALISM  AND  WAR  347 

disadvantages  and  limitations.  It  is  true  that  peace  Is  al- 
ways desirable  for  industrial  development,  and  that  under 
certain  social  and  financial  conditions  it  is  practically  neces- 
sary. It  Is  true  that  war  is  always  murderous,  and  fre- 
quently foolish;  and  that  it  always  deranges  the  social  and 
industrial  structure  of  the  nations  that  engage  In  it.  But 
these  truths  are  not  absolutely  universal,  nor  are  they  com- 
plete. For,  given  the  world  as  It  is  to-day,  we  can  not 
entirely  dissociate  Industrialism  from  war.  There  are  cer- 
tain problems,  raised  by  Industrial  development,  that  tend 
toward  a  military  solution;  there  are  certain  reasons  why, 
a  war  once  arising,  industrialism  tends  to  make  It  more 
bitter  and  more  widespread.  We  may  profitably  take  up 
each  of  these  subjects  In  turn  and  discuss  them,  not  as  mere 
abstractions,  but  as  applied  to  the  conditions  which  now 
exist. 

Instead  of  commencing  by  consideration  of  the  ways  in 
which  industrialism  tends  to  bring  about  wars,  we  will  ar- 
rive at  more  definite  conclusions  If  we  reverse  the  order, 
and  note  the  conditions  which  must  necessarily  be  fulfilled 
If  we  are  to  have  any  well-founded  expectation  of  universal 
peace. 

We  know,  at  the  outset,  that  there  Is  at  present  very  wide 
Inequality  in  living  standards  In  different  parts  of  the  world. 
We  know  also  that  there  are  wide  differences  in  wealth, 
not  between  classes  but  between  nations;  and  in  education, 
using  that  term  in  a  very  broad  sense.  Now,  In  the  present 
state  of  scientific  knowledge,  we  can  not  credit  these  differ- 
ences, to  any  large  extent,  to  differences  in  race  or  in  re- 
ligion, two  explanations  which  have  always  been  easily 
given  and  accepted  In  earlier  days.  On  the  contrary,  we 
have  seen  in  earlier  chapters  that  differences  In  such  matters 
have  very  little  real  effect,  one  way  or  the  other.  That  Is  to 
say,  the  effects  of  race  and  religion  are  not  insurmountable, 
provided  other  conditions  are  favorable,  though  It  would 
be  equally  untenable  to  say  that  they  have  no  effect  what- 


348  COAL,  IRON  AND  WAR 

ever.  They  do  have  some  effect  on  both  social  and  Indus- 
trial development,  but  the  really  limiting  factors  seem  to 
be  of  another  type. 

Freedom  of  emigration  and  immigration.  So  far  as  our 
present  type  of  civilization  is  concerned,  our  study  has  made 
it  evident  enough  that  the  most  important  single  factor, 
in  all  the  development  we  have  studied,  has  been  the  occur- 
rence of  raw  material  deposits,  and  particularly  of  fuel. 
This  conclusion  of  itself  throws  little  light  upon  our  present 
problem,  until  we  add  to  it  the  fact,  established  also  in  our 
earlier  studies,  that  the  natural  resources  of  the  world  are 
not  entirely  unlimited,  and  that  they  are  very  unequally  dis- 
tributed over  the  world's  surface.  This  is  specially  true, 
again,  of  coal  supplies.  And  as  a  corollary,  we  have  seen 
that  industrial  development,  national  wealth,  and  general 
well-being  have  shown  their  greatest  advances  in  regions 
and  countries  which  are  well  supplied  with  coal;  so  that  at 
present  we  may  almost  establish  direct  correlation  between 
the  poverty,  ignorance  and  low  living  standards  of  any 
nation  and  its  original  and  natural  deficiency  in  coal  supplies. 

This  brings  us,  however,  to  a  conclusion  with  very  serious 
implications  Indeed,  for  we  must  now  admit  that  the  In- 
equahtles  in  average  comfort  and  happiness,  existing  be- 
tween the  working  classes  of  different  countries,  are  due 
almost  entirely  to  natural  and  unchangeable  differences  In 
national  opportunity.  They  can  not  be  overcome  or  pal- 
liated by  re-adjustment  of  social  conditions  within  the  back- 
ward nation  itself;  and  the  natural  way  to  remedy  them 
is  by  a  flood  of  emigration  from  a  country  of  low  oppor- 
tunity to  one  of  high  opportunity.  That  solution  Is  so 
natural  that  It  will  Inevitably  be  followed,  provided  neither 
of  the  countries  involved  places  any  obstacle  in  its  course; 
and  if  the  difference  In  opportunity  offered  by  the  two 
countries  Is  really  very  great,  the  placing  of  any  such  ob- 
stacle will  be  looked  on  as  a  reasonable  cause  for  war. 
One  of  the  necessary  conditions  for  universal  peace,  then^ 


INDUSTRIALISM  AND  WAR  349 

Is  absolute  freedom  of  emigration  and  immigration.  It 
is  a  question  whether  any  prosperous  country  really  de- 
sires peace  upon  such  terms,  because  of  the  Inevitable  effect 
upon  the  average  well-being  of  its  own  citizens. 

Freedom  of  trade.  The  second  condition  which  Is  neces- 
sary, if  we  are  to  have  no  industrial  Incitement  to  war, 
is  absolute  freedom  of  trade.  For  it  can  be  seen  that  an 
Industrial  country,  with  large  export  manufacturing  capacity, 
can  be  seriously  Impoverished  by  preventing  these  goods 
from  entering  a  natural  market  for  them.  Of  course  no 
country  has  any  natural  moral  or  legal  right  to  expect  that 
Its  goods  will  be  permitted  to  enter  freely  every  desirable 
market,  but  under  our  existing  industrial  system  it  may 
often  come  to  mean  something  very  serious  to  the  produc- 
ing country  If  such  entry  be  restricted  or  cut  off  entirely. 
This  Is  not  an  entirely  new  feature,  for  one  of  Great 
Britain's  earliest  wars  with  China  was  carried  on  solely 
to  secure  an  entry  for  the  opium  produced  in  British  India ; 
and  similar  forcible  opening  of  markets  has  been  practised 
against  various  other  uncivilized  or  weak  countries  by  the 
more  powerful  industrial  nations.  So  far  no  serious  war 
has  been  caused  by  this  factor,  simply  because  in  no  case 
have  the  two  nations  involved  been  both  of  the  same  racial 
and  Industrial  type.  But  in  future,  particularly  In  view  of 
the  general  adoption  of  high  tariffs  which  seems  to  be  in 
progress,  there  may  be  Increasing  opportunities  for  trouble 
along  this  line. 

Protection  of  national  investments.  A  third  condition 
of  peace  is  that  protection  must  be  guaranteed  for  the 
citizens  of  any  country,  engaged  In  legitimate  enterprise 
in  a  foreign  country;  and  for  the  Investments  made  ex- 
ternally. We  know  that  this  condition  has  not  always 
been  met  In  the  past,  and  that  many  little  wars  and  a  few 
larger  struggles  have  arisen  on  this  account.  With  the 
growing  necessity  for  important  and  powerful  nations  to 
seek  greater  portions  of  their  raw  material  supplies  in  other 


350  COAL,  IRON  AND  WAR 

countries,  and  with  the  growing  tendency  to  secure  such 
supplies  by  direct  operation  instead  of  purchase,  there  will 
be  increasing  opportunities  of  friction.  This  will  partic- 
ularly be  the  case  in  the  two  or  three  decades  immediately 
ahead  of  us,  during  which  petroleum  will  be  an  important 
marine  fuel  for  two  great  nations,  neither  of  which  will 
be  able  to  supply  itself  in  home  territory. 

The  economic  incentive.  Historically  considered,  we 
find  that  most  wars  have  originated  in  entirely  unexpected 
and  unimportant  ways,  so  that  the  immediate  dispute  is 
over  an  altered  dispatch,  or  a  political  murder,  or  some 
equally  accidental  affair.  But  two  nations  do  not  go  to 
war  over  such  matters  unless  at  least  one  of  them  has  some 
better  reason  than  that  for  wanting  the  struggle.  And  this 
better  reason  is,  in  by  far  the  majority  of  cases,  connected 
with  industry  or  trade  in  some  important  way.  The  under- 
lying cause  of  a  great  war  is  therefor  usually  economic, 
though  the  immediate  incentive  is  commonly  given  by  some 
entirely  un-economic  incident  which  gives  a  better  appeal 
to  the  passion  and  emotions  of  the  populace.  For  it  is 
the  people,  after  all,  which  must  carry  on  the  war,  and 
without  genuine  popular  support  no  modern  war  could  take ) 
place.  ^ 

Now  the  great  danger  of  economic  motives  for  wars  is 
that  they  have  such  a  wide-spread  appeal,  because  severe 
economic  pressure  is  felt  directly  by  the  working  class 
throughout  the  entire  country.  It  is  for  this  reason  that 
a  democratic  government  is  even  more  liable  than  an  autoc- 
racy to  be  carried  into  a  war  for  purely  economic  reasons, 
and  it  is  this  fact  which  lessens  the  hopes  of  future  peace. 
So  long  as  our  Machine  Civilization  endures,  so  long  will 
the  existing  inequalities  In  natural  resources  be  translated 
into  greater  inequalities  In  living  conditions  and  economic 
opportunities,  as  between  the  countries  which  are  naturally 
favored  and  those  which  are  naturally  limited  by  their  re- 
sources.    The  real  danger  arises  when  the  working  people 


INDUSTRIALISM  AND  WAR  351 

of  a  country  feel,  rightly  or  wrongly,  that  war  offers  them 
a  relief  from  too  severe  economic  pressure;  and  when  this 
comes  to  pass  it  will  be  a  very  remarkable  government  in- 
deed which  will  stand  out  against  the  demand. 

Wars  have  been  brought  about  by  economic  motives  in 
the  past,  and  they  are  likely  to  come  about  for  similar 
reasons  in  the  future.  But,  even  admitting  this  probability, 
we  must  not  fall  into  the  error  of  assuming  that  war  is  an 
economic  thing  of  itself.  The  recent  war  is  of  particular 
interest  in  this  connection,  as  affording  an  example  of  larger- 
scale  waste  than  usual. 

The  costs  of  war.  In  discussing  the  amount  which  a 
war  has  cost  to  the  world,  it  will  be  inadvisable  to  take  into 
the  account  any  of  the  merely  moral  or  sentimental  losses, 
for  these  can  not  be  placed  upon  any  definite  basis.  On 
the  other  hand  we  must  avoid  such  simple  modes  of  account 
as  mere  additions  of  the  total  expenditures  of  the  different 
governments,  for  these  do  not  represent  in  any  close  way 
the  real  cost  of  a  war.  Of  the  sums  spent  by  any  govern- 
ment, a  large  fraction  represents  money  used  for  the  pay 
and  food  supplies  of  a  number  of  its  citizens,  temporarily 
engaged  in  military  duty;  and  this  is  not,  properly  speak- 
ing, a  necessary  loss  to  the  world.  An  additional  large 
amount  represents  waste,  extravagance  and  over-charges, 
for  a  government  is  rarely  able  to  buy  and  use  material  as 
economically  as  a  private  concern.  But  the  sums  so  wasted, 
though  they  impoverish  the  government  as  a  government, 
are  paid  over  to  a  certain  class  of.  its  citizens;  and  though 
they  may  represent  an  unfair  diversion  of  wealth,  they  do 
not  destroy  it  utterly.  Finally,  of  the  materials  bought  by 
the  government,  many  Items  are  not  properly  chargeable  as 
complete  losses  to  the  country  or  the  world,  for  some  part 
of  them  may  be  saved  or  recovered  to  use  for  productive 
purposes.  We  must  therefore  be  careful  not  to  over-esti- 
mate the  actual  costs,  which  as  we  shall  see  are  serious 
enough. 


352  COAL,  IRON  AND  WAR 

In  attempting  to  reach  some  definite  estimate  of  these 
costs,  we  will  assume  as  a  basis  that  in  July,  19 14,  the  world 
had  on  hand  a  certain  stock  of  materials,  to  which  it  was 
in  the  habit  of  adding  at  a  rate  which  we  have  already  deter- 
mined, and  for  which  further  production  it  had  available 
a  certain  amount  of  labor.  Now,  in  November,  19 18,  the 
same  world  had  lost  or  destroyed  part  of  the  original 
materials;  it  had  not  produced  as  much  as  usual  to  replace 
them,  because  a  large  part  of  its  normally  productive  labor 
was  in  the  service;  and  finally  a  very  respectable  fraction 
of  this  original  labor  supply  had  been  killed  or  otherwise 
incapacitated  for  production.  All  these  items  seem  to  be 
very  definite  losses,  which  we  may  fairly  take  into  account; 
and  by  proceeding  in  this  way  we  will  avoid  the  danger 
of  being  led  off  into  a  sentimental  view  of  the  case.  The 
matter  will  be  treated  exactly  as  if  we  were  operating  a 
large  business  or  slave  plantation,  and  were  endeavoring 
to  take  account  of  actual  losses  after  four  years  of  bad 
business. 

In  going  about  these  estimates  we  will  make  a  further 
limitation,  for  we  will  not  consider  the  losses  sustained  by 
Japan  or  the  United  States,  which  might  tend  to  render 
our  assumptions  and  conclusions  less  impartial.  We  will 
therefore  limit  consideration  to  the  losses  sustained  by  the 
warring  nations  of  Europe  and  by  their  dependencies,  and 
with  regard  to  these  we  will  take  up  in  turn  the  three  sources 
of  loss  noted  above. 

First,  there  is  the  question  of  material  loss.  Here  we 
must  avoid  over-statement,  which  in  this  particular  case  is 
a  very  present  source  of  danger.  Of  the  raw  and  manu- 
factured materials  bought  for  war  use,  a  very  large  fraction 
indeed  does  not  represent  total  loss.  We  can  only  accept 
as  losses  such  materials  as  are  completely  destroyed;  and 
these  we  must  value  at  their  real  cost  of  manufacture,  not 
at  the  price  paid  by  a  government.  And  even  these  values 
we  must  take  at  the  prices  of  early  19 14,  not  at  the  exagger- 


INDUSTRIALISM  AND  WAR  353 

ated  prices  caused  by  the  war  itself.  Considered  in  this 
way,  our  errors  will  all  be  in  the  direction  of  minimizing 
the  losses,  for  we  have  not  enough  data  for  coming  to  even 
approximate  conclusions  regarding  many  items.  We  can 
start,  however,  with  the  certainty  that  a  certain  shipping 
tonnage  was  destroyed;  and  that  certain  fractions  of  the 
world's  output  of  copper,  steel,  lead,  explosives,  oil  and  fuel 
were  entirely  destroyed  in  non-productive  uses. 

As  to  shipping  tonnage,  we  have  lost  a  total  of  some 
fourteen  million  tons;  and  considering  the  class  of  vessels 
included  it  would  be  hard  to  value  this  at  much  less  than 
$100  per  ton.  With  regard  to  the  other  items  there  is 
more  room  for  wide  difference  in  opinion,  but  we  may  at 
least  keep  well  within  bounds.  It  seems  safe  to  say  that 
during  the  four  years  of  war  at  least  one  third  of  the  cur- 
rent world  output  of  coal  and  oil;  a  tenth  of  its  copper, 
zinc  and  lead;  and  a  twentieth  of  its  steel  were  used  for 
military  purposes,  directly  or  indirectly,  and  were  entirely 
wasted  or  unrecoverable.  All  the  output  of  military  ex- 
plosives may  also  be  charged  off.  Taking  these  items  at 
the  low  unit  cost  justified  by  19 13-19 14  business  condi- 
tions, we  arrive  at  figures  about  as  follows: 

Shipping  tonnage,  14,000,000  at  $100 $1,400,000,000 

Copper,  800  million  lbs.  at  $0.12 96,000,000 

Lead,  800  millicyi  lbs.  at  $0.04 32,000,000 

Zinc,  800  million  lbs.  at  $0.05 40,000,000 

Steel,  12  million  tons  at  $25 300,000,000 

Coal,  1,000  million  tons  at  $1.50 1,500,000,000 

Oil,  500  million  barrels  at  $0.60 300,000,000 

Military  explosives,  estimated  at 2,000,000,000 


$5,668,000,000 


None  of  these  items  are  estimated  very  generously,  we 
have  entirely  disregarded  all  other  material  destroyed,  and 
we  have  taken  no  account  of  damage  done  to  buildings, 


354  COAL,  IRON  AND  WAR 

railways,  farm  lands  etc.  It  seems  to  be  therefore  entirely 
safe  to  place  the  actual  material  loss  as  certainly  not  less 
than  the  totals  so  reached;  actually  it  was  probably  several 
times  this  amount,  but  for  our  present  uses  the  lower  figures 
will  be  accepted. 

Second  in  our  costs  was  the  lost  productive  power,  due 
to  unproductive  employment  of  a  large  mass  of  labor. 
The  European  countries  placed,  at  one  time  or  another, 
some  fifty-five  million  men  in  the  field.  Of  course  these 
were  not  all  in  service  at  any  one  time,  and  it  would  prob- 
ably be  safest  to  assume  that  on  the  average  the  wasted 
productivity  amounted  to  i  Yz  years  per  man.  Now,  if 
these  men  had  remained  on  the  farm  or  in  the  mill  or 
mine,  they  would  have  produced  a  certain  amount  of  ma- 
terial above  the  cost  of  their  upkeep,  in  these  years.  It 
is  difficult  to  figure  this  at  less  than  $500  per  year  per 
man,  considering  that  England,  Germany  and  France  con- 
tributed twenty-five  million  men  of  the  total.  But,  if  we 
accept  even  this  low  figure  as  a  basis  for  our  estimates,  we 
arrive  at  a  total  loss  on  this  account  also,  of  some  forty 
thousand  million  dollars. 

We  have  heavily  under-estimated  this  particular  source 
of  loss,  which  was  in  reality  tremendous.  That  the  Euro- 
pean countries  were  able  to  carry  on  under  such  a  strain 
was  due  entirely  to  the  existence  of  the  very  large  reserve 
of  unused  power  existing  in  a  modern  industrial  state.  In 
an  earlier  chapter  we  have  noted  that  one  of  the  chief 
features  of  modern  industrialism  was  that  it  had  reduced 
the  amount  of  labor  necessary  per  unit  of  production,  so 
that  many  people  did  no  physical  work  at  all,  and  the  others 
did  far  less  than  the  laborers  of  a  century  ago.  During  the 
World  War  all  these  spare  or  reserve  powers  were  called 
into  use,  to  fill  the  gaps  made  by  the  men  in  the  line.  All 
of  the  previously  idle  or  parasitic  classes  found  some  pro- 
ductive work,   either   voluntarily  or   under   duress.     This 


INDUSTRIALISM  AND  WAR  355 

explains  how  it  was  possible  to  carry  on  the  normal  work 
of  the  nations  during  the  war,  though  of  course  it  was  not 
an  economic  way  of  doing  so  under  ordinary  conditions. 

Finally,  we  have  the  direct  cost  in  life.  During  the  war 
the  European  countries  lost  approximately  ten  million  in 
killed.  To  these  we  might  easily  add  perhaps  ten  per  cent, 
of  the  other  casualties,  for  in  spite  of  all  our  talk  about 
reconstruction  of  wounded  men  we  must  realize  that  a 
laborer  or  artisan  who  has  lost  his  legs,  or  eyes,  or  an  arm, 
Is  no  longer  a  productive  member  of  society,  in  the  same 
way  and  to  anything  like  the  same  extent  he  was  before 
being  disabled.  But  since  this  would  be  open  to  discussion 
we  will  not  charge  In  this  extra  loss,  but  merely  figure  on  the 
basis  of  deaths. 

In  doing  this  we  are  dealing  with  men  who  were  Europe- 
ans, white  men,  mostly  farm  laborers  and  artisans,  in  good 
physical  condition  and  young.  It  would  be  difficult  to  value 
them  at  less  than  the  price  of  a  negro  field  hand  In  i860, 
particularly  since  all  commodity  prices  are  higher  now  than 
then.  But  if  we  do  this,  and  assume  that  the  men  killed 
In  Europe  would  have  been  worth  $1,000  each  to  a  planta- 
tion owner,  we  arrive  at  a  loss  of  some  ten  thousand  million 
dollars  for  this  item. 

Summing  up  our  fractional  costs  in  round  figures  we  have 
a  total  result  as  follows: 

Material  losses $  5,000,000,000 

Lost  productivity 40,000,000,000 

Men  killed  10,000,000,000 

Total  war  cost  to  Europe $55,000,000,000 

It  will  be  recalled  that,  in  arriving  at  these  figures,  we 
have  looked  in  each  case  on  the  most  favorable  side  of  the 
matter,  and  that  anyone  wishing  to  make  a  showing  of  ex- 
treme results  could  have  easily,  and  perhaps  justifiably,  ar- 
rived at  a  total  double  the  one  we  present.     But  In  any 


356  COAL,  IRON  AND  WAR 

case  the  situation  is  bad  enough,  and  one  does  not  have  to 
be  constitutionally  averse  to  war  to  realize  that  it  is  a  very 
expensive  luxury  indeed.  It  is  the  realization  of  this  fact, 
by  the  countries  of  Europe,  that  led  them  to  sink  national 
pride,  and  abandon  immediate  national  interest,  in  an  at- 
tempt to  grasp  at  any  plan  which  seemed,  for  a  moment, 
to  promise  that  in  future  this  horror  could  not  recur.  The 
countries  which  had  not  suffered  so  seriously,  of  course  do 
not  feel  the  matter  in  quite  the  same  way  as  yet,  and  their 
future  progress  will  on  that  account  be  a  matter  of  serious 
interest  to  the  world.  The  difference  arises,  not  from 
differences  in  national  stupidity  or  national  selfishness,  but 
from  differences  in  the  losses  sustained.  If  America,  for 
example,  had  suffered  proportionately  to  England  or  France, 
there  would  have  been  some  two  million  dead  Americans 
left  in  Europe;  and  the  arguments  in  favor  of  future  peace 
might  seem  more  forcible. 

The  future  of  war.  We  have  seen,  in  the  preceding 
chapter,  that  some  of  the  industrial  problems  which  will 
press  on  the  civilized  world  In  the  decades  immediately  to 
come  are  likely  to  assume  such  shape  that  war  will  be  sug- 
gested as  the  simplest  solution.  We  have  also  seen  some- 
thing of  what  it  costs  the  world  to  carry  out  a  modern  war 
when  great  industrial  nations  are  able  to  bend  all  their 
energies  to  its  prosecution.  And,  since  there  is  as  yet  no 
definite  hope  that  any  mechanism  for  preventing  war  will 
be  put  in  operation  soon,  we  are  forced  to  accept  the  pos- 
siblhty  that  at  some  time  In  the  near  future  we  will  again 
face  a  great  war  of  modern  type.  What  this  would  mean 
to  the  social  and  political  structure  of  the  world  does  not 
need  discussion.  Merely  from  the  standpoint  of  insuring 
the  safety  of  our  institutions  we  must  bend  all  energies  to- 
ward limiting  the  scope  of  any  such  future  war.  It  must 
not  be  allowed  to  take  the  form  of  a  long-continued  land 
struggle,  in  the  territory  of  an  Industrial  country.  To 
avoid  this  involves  a  high  degree  of  preparedness;  it  also 


INDUSTRIALISM  AND  WAR  357 

involves  protective  alliances  or  very  definite  understand- 
ings tending  to  limit  the  area  of  possible  conflict. 

It  is  of  course  highly  improbable  that  the  next  war  will 
take  place  in  such  a  theater,  and  under  such  conditions,  as 
to  bring  about  results  closely  like  those  of  the  recent  World 
War;  and  to  that  extent  we  are  barred  from  assuming  that 
all  of  its  features  will  be  repeated  in  the  war  to  come. 
But  there  were  some  matters  of  very  general  type  to  which 
attention  may  be  called,  as  being  likely  to  recur.  Most  of 
these  arise  from  the  fact  that,  under  our  new  conceptions  of 
war  between  industrial  nations,  we  are  dealing  with  war 
not  between  armies  but  between  peoples.  The  old  distinc- 
tions between  civilian  population  and  army  no  longer  has 
any  validity,  for  practically  all  of  the  civilian  population  — 
men,  women  and  children  —  are  engaged  in  raising  food 
or  making  supplies  for  the  fighting  forces.  It  is  practic- 
ally certain  that  in  any  future  war  one  or  both  contestants 
will  act  on  the  assumption  that  the  surest  way  to  defeat 
an  army  is  to  wreck  the  factories  which  supply  it;  and  that 
the  surest  way  to  wreck  the  industrial  system  is  to  destroy 
Its  food  supply.  Any  weapon  promising  to  shatter  the  in- 
dustrial structure  or  destroy  the  civilian  morale  is  likely 
to  be  employed  either  openly  or  secretly.  And  as  we  have 
seen  from  the  use  of  gas,  the  adoption  of  such  theories  and 
practice  by  one  contestant  will  ultimately  mean  their  adop- 
tion by  the  other  also. 

Action  taking  place  on  the  land  or  on  the  water  can  be 
limited,  so  that  adequate  protection  may  be  given  the  areas 
behind  the  lines.  But  action  under  the  water  and  in  the  air 
can  not  be  guarded  against  so  effectively,  and  in  the  plane 
and  the  submarine  we  have  found  powerful  offensive  agents 
which  can  under  any  ordinary  circumstances  penetrate  at 
will  any  guarding  cordon  or  blockade.  In  any  future  war 
all  parts  of  the  warring  countries  may  become  theaters  of 
enemy  action ;  and  all  elements  of  the  populations  will  share 
In  the  dangers  and  losses. 


CHAPTER  XXVII 
THE  FORMS  OF  FUTURE  PROGRESS 

We  have  managed  to  come  thus  far,  in  tracing  the  course 
of  modern  industrialism  from  its  Inception  to  the  present 
day,  without  calling  into  service  any  preconceived  theory 
as  to  the  underlying  causes  which  have  determined  the  trend 
of  that  remarkable  evolution.  Even  with  regard  to  the 
social  and  political  changes  which  have  accompanied  our 
industrial  progress,  there  has  been  little  stress  laid  upon 
any  assumed  necessity  for  development  in  any  certain  di- 
rection, under  the  influence  of  overpowering  natural  or 
supernatural  forces.  The  facts  have  merely  been  noted  as 
they  came  to  light,  and  accepted  as  facts,  without  attempt 
to  force  them  into  use  as  supports  for  any  pre-conceived 
theory  of  the  world,  or  of  social  progress,  or  of  the  state. 

With  our  later  chapters,  however,  we  have  finally  come 
onto  ground  where  something  more  than  this  must  be  at- 
tempted, if  we  are  to  arrive  at  any  conclusions  regarding 
the  future  trend  of  development  in  any  of  these  lines.  For 
we  have  seen  that,  even  for  the  nearer  future,  there  are 
apparently  antagonistic  tendencies,  within  our  industrial- 
ism itself,  in  relation  to  a  matter  of  so  much  world  Import- 
ance as  the  question  of  war. 

If  we  pre-judge  these  questions,  by  assuming  that  the 
human  race  Is  being  driven  in  a  definitely  determined  direc- 
tion, under  the  influence  of  omnipotent  forces,  it  is  of 
course  easy  enough  to  arrive  at  a  perfectly  definite  and  as- 
sured conclusion  in  regard  to  any  one  of  them.  For  in 
that  case  we  have  merely  assumed  a  basal  principle  which, 
once  admitted,  must  lead  directly  in  each  case  to  one  cer- 
tain conclusion.     The  conclusion  will,  of  course,  vary  neces- 

3.S8 


THE  FORMS  OF  FUTURE  PROGRESS  359 

sarily  according  to  the  theory  adopted;  the  believer  in  direct 
divine  control  will  necessarily  arrive  at  one  result;  the  be- 
liever in  purely  natural  physical  evolution  at  another 
diametrically  opposed.  But  either  basis  once  accepted, 
ordinary  logic  brings  one  inevitably  to  a  pre-destined  con- 
clusion. 

When  we  turn  from  this  most  general  phase  of  the  mat- 
ter to  such  more  special  phases  as  the  mode  in  which  our 
progress  takes  form,  we  meet  with  the  same  difficulties. 
For  even  here,  the  original  choice  of  some  special  method 
of  action  brings  with  it  always  corresponding  and  neces- 
sary conclusions.  If  we  assume,  for  example,  that  political 
progress  is  a  function  of  increasing  democracy,  we  arrive 
necessarily  at  widely  different  ideas  as  to  necessary  action 
and  results  from  those  which  we  would  have  to  reach  if  we 
started  from  some  other  equally  possible  principle.  And 
so,  to  an  even  greater  extent,  with  the  lesser  theories,  affect- 
ing industrial  and  social  growth  in  narrower  ways.  A 
theory  of  life,  or  of  the  world,  or  of  the  state  carries  with 
it  the  necessity  for  judging  all  things  as  they  happen  to  ap- 
pear from  the  standpoint  of  that  theory,  and  of  assuming 
that  all  future  changes  must  take  place  along  the  lines 
which  will  give  greatest  effect  to  the  forces  which  we  have 
accepted  as  omnipotent. 

The  futility  of  such  methods  of  attacking  the  problem 
of  progress  is  evident  enough,  yet  nevertheless  much  of  the 
literature  of  industrial  and  social  development  is  based  upon 
them.  Whether  we  deal  with  a  book  on  social  evolution, 
cadging  for  the  support  of  religious  sectarians,  or  one  on 
natural  political  evolution,  explaining  the  justice  and  neces- 
sity of  German  aggression  on  Belgium,  or  one  on  syndical- 
ism, pointing  out  the  class-uplift  to  be  derived  from  sabo- 
tage, we  are  dealing  in  each  case  with  a  study  starting  from 
pre-conceived  theory  and  of  necessity  arriving  at  predestined 
conclusions. 

It  is  very  difficult  to  keep  entirely  free  from  the  unin- 


36o  COAL,  IRON  AND  WAR 

tentlonal  and  unobserved  bias  due  to  class,  race  and  national 
prejudice,  not  to  speak  of  religious  influences;  but  we  may 
attempt  to  outline,  merely  as  a  record  of  accomplished  fact, 
the  course  of  development  that  has  taken  place  since  modern 
industrialism  arrived  on  iihe  scene.  In  doing  this  we  will 
attempt  also  to  avoid  judging  any  of  the  matters  involved, 
so  far  as  their  moral  bearing  is  concerned.  To  do  that 
would  be  to  fall  back  into  the  error  which  has  just  been  dis- 
cussed, because  it  would  imply  that  we  start  by  accepting 
some  definite  natural  or  supernatural  sanction  as  a  warrant 
for  our  judgments. 

Increased  material  wealth.  Taken  up  in  this  way,  we 
can  see  that  there  stand  out  from  the  less  important  things 
two  main  changes,  on  which  it  seems  as  if  we  could  all 
agree;  and  a  third,  whose  origin  and  effects  are  less  clear 
and  on  which  there  is  more  room  for  difference  of  opinion. 
The  first  great  change  in  conditions  since  the  time  of  the  In- 
dustrial Revolution  in  England  seems  to  have  occurred,  and 
to  the  same  extent,  in  all  of  the  modern  industrial  nations, 
so  that  we  can  look  upon  it  as  being  caused  by  some  very 
broadly  acting  force,  and  not  by  local  or  special  influences. 
It  is,  that  there  has  been  a  very  great  increase  in  the  pro- 
duction of  material  wealth,  as  expressed  in  commodities; 
and  that  this  increase  has  been,  for  the  first  time  in  human 
history,  at  a  rate  faster  than  that  of  increase  of  population, 
so  that  there  has  been  also  a  very  striking  increase  in  wealth 
per  capita.  This  condition  is,  it  must  be  repeated,  one  ab- 
solutely new  in  the  history  of  the  world,  and  it  is  thanks 
to  the  steam-engine  and  the  machine  tool  that  it  has  been 
brought  about.  It  can  be  seen  readily  that  it  is  largely  in- 
dependent of  any  changes  in  form  of  government,  or  in 
political  or  religious  ideas. 

Now,  if  increased  production  of  wealth  were  entirely 
independent  of  modes  of  government  and  of  tendencies  of 
thought,  we  could  dismiss  it  from  further  consideration. 
For  in  that  case  the  force  of  the  machine  civilization  would, 


THE  FORMS  OF  FUTURE  PROGRESS  361 

acting  of  itself,  tend  toward  greater  and  greater  produc- 
tion of  commodities  up  to  the  point  that  we  encountered 
natural  obstacles  to  further  increase,  such  as  exhaustion  of 
raw  material  supplies;  and  we  have  already  seen  that  such 
exhaustion,  for  our  really  important  resources,  must  be  set 
at  a  date  very  far  off  indeed. 

Actually,  however,  our  machine  civilization  will  not 
function  of  itself,  but  needs  definite  and  continued  human 
effort  to  keep  it  in  motion.  This  is  applied  in  the  labor, 
both  mental  and  physical,  required  to  carry  on  existing 
processes;  and  in  the  labor,  almost  entirely  mental,  required 
to  improve  them  so  as  to  ensure  further  progress.  For 
in  the  last  analysis  our  increased  output  of  goods  means 
simply  increased  control,  by  man,  over  natural  forces  and 
conditions.  We  therefore  come  to  see  that  any  change  in 
political,  social,  or  religious  ideas  which  makes  for  lessened 
production,  or  for  stagnation  in  technical  progress,  affects 
very  directly  this  first  great  gain  of  modern  industrialism. 
That  is  the  real  underlying  objection  to  syndicalism  on  the 
one  hand  and  to  monopoly  on  the  other;  for  both  tend  to 
reduce  output  and  prevent  technical  progress. 

Higher  living  standard.  If  the  increased  material 
wealth,  produced  as  has  been  noted,  could  possibly  remain 
massed  in  the  hands  of  those  who  had  produced  it,  the 
mere  fact  of  the  increase  could  have  no  beneficial  influences 
on  social  conditions  in  general.  And  it  is  well  to  note,  a 
fact  commonly  overlooked,  that  this  would  be  the  case, 
regardless  of  whether  the  new  wealth  went  into  the  hands 
of  the  capitalist,  or  of  the  laborers  directly  interested  in 
its  production.  Under  the  latter  condition  the  new  wealth 
would  be  distributed  a  little  more  widely,  but  it  would  have 
no  broad  results  on  the  well-being  of  the  community  in 
general. 

Fortunately,  however,  along  with  our  great  gains  in  out- 
put of  commodities,  there  have  been  also  great  advances 
in  the  average  living  standard,  due  to  the  more  equal  dis- 


362  COAL,  IRON  AND  WAR 

tributlon  of  the  goods  produced.  There  can  be  little  room 
for  doubt  as  to  the  facts  of  the  case,  and  probably  every- 
one really  believes  what  has  just  been  said,  though  of  course 
radical  thinkers  do  not  call  attention  to  this  condition.  In 
reality  there  seems  to  have  been  a  pretty  steady  and  very 
large  increase  in  the  comfort,  food  supply  safety  and  gen- 
eral well-being  of  everyone  in  the  modern  community,  as 
compared  with  the  conditions  which  existed  one  hundred  or 
even  fifty  years  ago.  Working  hours  are  shorter  for  every- 
one, there  is  more  food  available  per  capita,  there  is  more 
clothing  available  for  each  person,  and  above  all  there  is 
far  greater  safety  and  community-comfort  about  life  now 
than  was  possible,  even  in  England,  a  century  ago.  All  of 
these  things  are  purely  and  simply  matters  of  fact,  which 
can  be  tested  by  actual  statistics.  There  has  been  very 
definite  and  general  progress  along  this  line;  and  It  will  not 
do  to  simply  pass  that  by  and  say  that  under  some  other 
dispensation  there  might  have  been  more  progress. 

At  this  point  we  might  note  that,  during  the  recent  war, 
we  have  passed  through  a  time  when  there  was  a  destruc- 
tion of  wealth,  along  with  a  destruction  of  men;  and  in 
such  quantity  that  there  Is  for  the  moment  a  poorer  world, 
on  the  average,  than  before  the  war.  This  condition  can 
not  be  righted  until  production  everywhere  reaches  its  old 
levels. 

The  growth  of  democracy.  The  great  increase  in  ma- 
terial wealth  was  due  entirely  to  the  action  of  modern  in- 
dustrialism, and  the  more  equal  distribution  of  such  wealth 
has  been  also  effected,  in  part,  by  the  changes  In  Industrial 
conditions.  But  there  has  been  a  third  factor  at  work  to 
bring  about  the  conditions  which  we  find  to-day.  This  fac- 
tor, of  far  greater  antiquity  than  the  others  so  far  as  its 
beginnings  are  concerned,  has  however  only  come  Into  full 
play  during  the  modern  industrial  period.  It  Is  the  ap- 
proach to  equality  in  political  rights,  as  expressed  by  the 
gradual  growth  of  political  democracy. 


THE  FORMS  OF  FUTURE  PROGRESS  363 

In  our  own  country  and  in  England  the  spread  of  demo- 
cratic control  has  been  so  continuous  that,  taking  it  into 
consideration  along  with  the  disappearance  of  serfdom  and 
of  slavery,  the  general  tendency  has  been  to  think  of  the 
progress  of  the  world  as  having  for  its  main  feature  the  at- 
tainment of  individual  human  freedom.  Some  of  the 
political  schools  have  considered  such  freedom  as  the  cause 
of  progress;  others  have  treated  freedom  as  the  effect  of 
progress.  But  the  fact  that  some  general  correlation  be- 
tween the  two  phenomena  is  accepted  by  most  writers  should 
not  blind  us  to  the  fact  that  there  are  two  very  important 
schools  of  thought  which  tend,  explicitly  or  impUcitly,  in 
an  entirely  other  direction.  Neither  the  rigorously  scien- 
tific application  of  natural  evolution,  nor  the  otherwise  opti- 
mistic anticipations  of  the  socialists,  lead  us  in  the  direction 
of  further  democracy.  Both  in  fact,  whether  admittedly 
or  not,  tend  rather  in  the  direction  of  a  very  strong  and 
permanent  control  of  political  and  social  action;  and  of  the 
creation  in  each  case  of  a  definitely  governing  class,  as  dis- 
tinct from  the  governed  mass.  Whether  this  class  is  to 
be  the  intellectual  elite,  as  anticipated  by  the  evolutionist; 
or  a  bureaucracy  of  functionaries,  as  will  be  developed 
from  a  continuous  socialist  control,  does  not  in  any  way 
alter  the  conclusion  that  in  neither  case  will  there  be  a 
democracy.  We  have,  therefore,  the  possibility  of  reac- 
tions against  the  democratic  trend,  from  two  different  direc- 
tions; and  we  may  expect  that  in  countries  where  conditions 
are  favorable  to  these  new  doctrines  there  may  be  develop- 
ment along  lines  which  we  would  not  regard  as  normal  for 
England  or  America.  For  this  reason  we  can  not  regard 
democracy  as  being  so  absolutely  universal  a  form  of  gov- 
ernment as  it  is  sometimes  considered;  we  can  merely  regard 
it  as  being  the  form  which  seems  to  be  best  fitted  to  our 
own  conditions  and  inherited  ideas. 

The  equalization  of  opportunity.  If  we  accept  demo- 
cracy as  a  guiding  principle  for  the  political  evolution  of 


364  COAL,  IRON  AND  WAR 

our  own  country  and  of  countries  of  similar  historic  type, 
we,  must  accept  immediately  certain  of  its  implications. 
There  will  of  course  be  opportunity  for  education  offered 
to  all  the  citizens  of  a  democratic  country,  for  the  universal 
adult  suffrage  toward  which  our  democracies  tend  can  not 
be  safely  or  intelligently  exercised  by  an  ignorant  mass. 
And,  equally  obviously,  there  must  be  a  growing  tendency 
toward  equalization  of  opportunity  in  other  lines,  indus- 
trial and  social,  for  having  once  given  political  power  to 
all  classes  alike,  there  will  be  a  very  natural  advance  toward 
equality  in  other  lines. 

We  need  not  admit  that  all  men  are  equal  —  mentally, 
morally  or  physically — for  that  is  demonstrably  untrue; 
and  all  the  political  practice  based  on  such  a  theory  has 
always  come  to  wreck,  down  to  our  own  experiences  after 
1865.  ^"^  it  can  be  fairly  urged  that,  accepting  natural 
inequalities,  these  should  not  be  Interfered  with  by  artificial 
regulation  or  classification.  Given  a  mass  of  men  of  na- 
turally unequal  ability,  their  individual  betterment  should 
be  limited  only  by  these  original  inequalities.  And,  as  has 
been  clearly  stated  by  one  ^  of  the  few  scientists  whose  ap- 
plications of  evolutional  ideas  have  led  to  anything  definite 
in  sociology,  education  is  the  one  factor,  in  such  better- 
ment and  equalization  of  opportunity,  that  is  entirely  within 
our  control.  The  fact  that  much  of  the  so-called  education 
offered  In  the  past  has  produced  little  positive  result  is  not 
an  argument  against  its  future  value,  and  we  have  seen  the 
very  direct  and  important  part  it  plays  in  such  Immediately 
practical  matters  as  the  progress  of  invention  and  discovery. 

The  strength  of  nationalism.  The  development,  indus- 
trial, social  and  political,  of  any  community  is  based  upon 
the  action  of  three  main  factors,  all  of  which  must  be  taken 
into  consideration  when  we  discuss  the  trend  of  its  future 
growth.     Two  of  these  factors  affect  alike  plants,  animals, 

iWard,   Lester   F.     "Dynamic   Society,"  New   York,   1883;    "Applied   So- 
ciology," New  York,  1906. 


THE  FORMS  OF  FUTURE  PROGRESS  365 

men  and  nations;  while  one  Is  peculiar  to  human  beings  and 
human  communities.  There  is  always  danger  that,  in  con- 
sidering social  evolution,  we  will  play  too  much  stress  upon 
one  particular  factor,  and  overlook  or  minimize  the  others. 

These  three  factors  are  the  effects  of  the  inheritance,  of 
the  physical  environment,  and  of  intentional  effort.  Of 
these  the  two  first  are  practically  out  of  human  control  so 
far  as  any  given  generation  at  least  is  concerned;  but  the 
third  is  not  so  entirely  uncontrollable.  For  this  reason, 
since  It  is  the  one  which  must  be  brought  into  play  in  order 
to  effect  any  immediate  change.  It  is  the  one  on  which  re- 
formers of  all  sorts  necessarily  lay  greatest  stress.  Mean- 
time the  other  factors  exist,  and  serve  to  modify  or  limit  the 
results  of  intentional  human  action,  so  that  often  times  the 
final  results  are  far  from  what  had  been  anticipated.  To 
have  this  disparity  brought  home  we  need  only  contrast  the 
hopes  of  the  French  Revolution  in  1789  with  its  practice 
In  1793;  or  the  dreams  of  the  abolitionists  with  the  prac- 
tice of  reconstruction.  In  both  cases  reforms  which  in 
themselves  were  entirely  justifiable  led  to  results  which 
were  equally  deplorable.  As  for  the  action  of  the  physical 
environment,  we  have  had  ample  evidences  of  Its  great 
effects,  during  the  period  of  modern  industrialism,  when  we 
studied  the  course  of  events  in  the  great  coal-holding  coun- 
tries. 

The  general  effect  of  the  combined  action  of  all  three 
factors,  during  the  past  century,  seems  to  have  been  a  large 
development  of  the  spirit  of  nationalism.  In  such  countries  as 
possessed  any  essential  unity  of  race  or  of  history.  When, 
In  such  cases,  there  has  been  also  great  Increase  in  national 
wealth,  due  to  Industrialism,  along  with  any  fair  approach 
to  equality  in  political  rights  and  equalization  of  oppor- 
tunity, the  traditional  and  environmental  factors  have  been 
together  strong  enough  to  overcome  any  purely  Intellectual 
tendencies  towards  either  socialism  within  the  state  or  in- 
ternationalism without. 


366  COAL,  IRON  AND  WAR 

On  the  other  hand,  In  countries  lacking  In  essential  unity 
or  in  equality,  there  have  been  separatist  tendencies  created, 
along  racial  or  class  lines;  and  In  both  cases  there  has  been 
a  tendency  toward  international  rather  than  national  forms 
of  aspiration.  Both  racial  and  class  ambitions  and  antagon- 
isms were  widely  preached  In  the  two  decades  preceding  the 
World  War,  and  In  both  cases  the  events  of  the  war  gave 
these  schools  the  greatest  possible  opportunity  for  develop- 
ment. It  Is  unlikely  that  conditions  will  be  as  favorable  in 
future,  and  we  may  fairly  expect  that  both  lines  of  en- 
deavor will  reach  their  maximum  of  expansion  and  of  in- 
fluence very  shortly,  if  indeed  they  have  not  already  passed 
that  maximum. 

In  our  own  country,  and  in  most  of  those  in  which  we  are 
deeply  interested,  underlying  conditions  seem  to  point 
toward  strengthening,  rather  than  weakening  of  nation- 
alist ideas  and  practice.  The  United  States,  France 
and  England  are  not  likely  to  split  up  along  class  or  ra- 
cial lines  of  cleavage.  They  are  all  likely,  on  the  other 
hand,  to  develop  along  more  strongly  national  lines,  and 
to  practice  greater  government  control  just  In  order  to  re- 
move some  of  the  opportunities  for  such  cleavage.  The 
changes  necessary  in  these  respects  will  depend  In  large  part 
on  the  existing  conditions,  as  to  equalization  of  opportunity; 
and  in  these  respects  some  of  the  countries  named  are  In 
better  shape  than  others.  A  high  per  centage  of  land-own- 
ing population  and  further  increases  In  material  production 
aid  in  stability;  over-concentration  of  land  ownership  or 
restriction  of  future  Industrialism  would,  on  the  other  hand, 
make  for  further  political  re-adjustments. 

The  future  of  internationalism.  From  internationalism, 
as  the  main  aim  of  our  development,  we  may  differ  very 
sharply,  as  tending  to  lead  in  directions  which  would  retard 
rather  than  aid  that  development.  And  this  is  true  of 
qlther  of  its  forms,  for  neither  syndicalism  nor  unqualified 


THE  FORMS  OF  FUTURE  PROGRESS  367 

pacifism  can  be  accepted  as  a  guiding  principle  for  any  na- 
tion. At  the  moment,  taking  account  of  the  losses  of  the 
war,  the  urgent  necessity  is  for  the  greatest  possible  effi- 
ciency in  production,  in  order  to  make  up  these  losses;  and^ 
this  maximum  of  efficiency  seems  most  likely  to  be  attained 
by  competition  within  the  nation  and  between  the  nations. 
A  strong  nation,  with  such  political  mechanism  and  prac- 
tice as  will  most  reduce  Internal  strife,  seems  to  be  the 
direction  which  future  development  will  take,  and  In  the 
long  run  it  offers  perhaps  the  best  basis  for  any  rational 
hope  of  future  world  peace. 

With  development  of  a  strong  and  Independent  national 
consciousness,  however,  there  must  In  time  come  the  be- 
ginnings of  a  real  International  consciousness.  We  have 
seen,  in  the  course  of  our  study  of  the  growth  of  industrial- 
ism in  general  and  of  foreign  trade  in  particular,  that  It  Is 
folly  to  think  that  a  great  Industrial  nation  can  now  Isolate 
itself  from  world  affairs.  The  attempt  to  do  so  merely 
postpones  an  inevitable  day  of  reckoning.  And  in  view 
of  the  tremendous  material  losses  which  we  have  seen  were 
sustained  by  the  world  during  the  recent  struggle,  every 
sane  man  realizes  that  another  war  of  that  type,  within  the 
lifetime  of  the  present  generation,  would  wreck  the  Indus- 
trial, social  and  political  structure  of  all  the  civilized  world. 
Our  margin  of  safety,  as  against  famine  and  crime,  Is  as 
yet  too  small  to  permit  indulgence  in  such  expensive  pas- 
times. Merely  from  a  selfish  standpoint,  we  must  arrive 
at  some  better  method  than  war  for  settling  International 
disputes  and  differences.  So  far  as  past  development 
throws  any  light  on  the  future,  the  final  solution  here  is 
likely  to  come  about,  not  through  the  formation  of  an  In- 
ternational state,  but  through  the  cooperation  of  strong 
national  units,  each  freely  developing  along  its  individual 
line. 

A  group  of  such  units,  with  economic  interests  not  top 


368  COAL,  IRON  AND  WAR 

widely  opposed,  and  acting  together  under  express  or  Im- 
plied alliance,  could  even  to-day  go  far  toward  preventing 
some  wars  and  limiting  the  scope  of  all  others. 

The  obstacles  to  peace.  The  objections  to  an  effective 
league  of  nations  are  to  a  large  extent  selfish  and  perhaps 
transitory;  but  the  obstacles  In  the  way  of  permanent  peace, 
under  our  present  type  of  civilization,  are  very  serious  In- 
deed and  perhaps  Insurmountable.  The  seriousness  of  the 
matter  arises  from  the  facts  that  the  chief  Incentives  to  fu- 
ture war,  which  we  see  even  now  exposed,  are  economic  and 
industrial;  that  they  Involve  the  great  Industrial  nations; 
and  that  democracies  are  peculiarly  liable  to  undertake  war 
as  a  relief  from  economic  pressure.  Incentives  of  this  dan- 
gerous type  are  afforded  by  the  desire  of  soviet  Russia  to 
spread  its  economic  doctrine;  by  the  desires  of  Great  Bri- 
tain and  the  United  States  to  control  the  fuel  oil  supplies 
of  the  Caspian  and  Caribbean  areas  respectively;  by  the  de- 
sire of  Japan  to  secure  a  continental  area  for  expansion; 
and  by  the  high  probability  that  China  will  develop  her 
industrial  resources.  Each  of  these  conditions  comes  to 
pass  as  the  result  of  a  thoroughly  natural  evolution,  and 
violent  assertion  of  each  of  the  assumed  necessities  is  prob- 
able enough  under  our  current  standard  of  International 
morality.  When,  as  in  most  of  these  cases,  there  are  also 
vast  differences  in  race  and  religion  between  the  nations 
which  will  be  involved,  the  hope  of  permanent  peaceful  solu- 
tions within  the  two  or  three  decades  ahead  seems  slight 
indeed. 

The  trend  of  industrial  evolution.  Meantime,  within 
the  structure  of  industry  itself,  we  see  that  there  are  cer- 
tain tendencies  which  In  the  long  runjnay  bring  about  vast 
changes  In  International  relations.  /For  one  hundred  and 
fifty  years  the  world  has  been  engaged  In  the  intensive 
material  development  which  has  culminated  In  our  present 
Machine  Civilization.  There  Is  no  reason  to  believe  that 
this  development  is  nearing  Its  end,  but  even  before  the  war 


THE  FORMS  OF  FUTURE  PROGRESS  369 

there  seemed  to  be  indications  that  the  machine  was  slow- 
ing down  perceptibly,  and  that  a  change  in  trend  of  future 
development  was  impending.  The  decade  ending  with 
1920  will  almost  certainly  show,  for  such  important  fac- 
tors as  world  population,  coal  output  and  steel  output,  the 
smallest  rate  of  increase  that  any  decade  has  shown  for 
over  a  hundred  years.  And  this  decrease  in  rate  of  growth 
will  not  be  due  entirely  to  the  World  War,  because  it  was 
in  progress  even  before  the  war. 

Further  than  this,  we  have  seen  that  though  our  coal  and 
iron  resources  are  not  nearing  exhaustion,  we  have  prob- 
ably passed  the  point  of  maximum  cheapness  for  each  of  the 
raw  materials  and  for  its  products.  In  future  they  will  be 
scarcer  and  dearer,  as  compared  with  other  and  newer 
resources.  And  with  this  will  come  about  changes  in  the 
relative  importance  of  producing  districts  and  of  the  power 
of  nations.  The  relatively  brief  period,  perhaps  only  thirty 
or  forty  years,  during  which  petroleum  will  be  of  serious 
Industrial  importance  will  not  affect  these  conclusions  to 
any  large  degree. 

Finally,  partly  as  the  result  of  the  fiscal  necessities  of  the 
nations,  we  seem  likely  to  witness  an  intensified  nationalism 
everywhere,  and  this  will  be  expressed  in  its  Industrial  re- 
lations by  high  tariffs  and  by  attempts  to  make  the  respec- 
tive nations  self-supplied.  This  implies,  however,  some  de- 
gree of  decentralization  of  industries,  as  compared  with 
their  present  localization  in  a  few  countries;  and  it  im- 
plies also  a  lessening  Importance  of  transport  as  compared 
with  manufacture.  In  place  of  using  a  third  of  our  coal 
merely  to  carry  goods  up  and  down  the  earth,  we  will  be 
able  to  use  this  fuel  in  more  directly  economic  ways. 

All  of  these  factors  work  together  toward  lessening  the 
pressure  upon  our  coal  and  iron  ore  resources;  toward  re- 
adjustments of  the  balance  of  power  between  localities  and 
between  nations;  and  toward  throwing  the  trend  of  our 
future  development  into  other  lines  than  those  which  have 


370  COAL,  IRON  AND  WAR 

been  heretofore  preeminent.  The  capital  and  labor  which 
would  formerly  have  been  employed  in  transport  and  the 
cruder  manufactures  will  in  future  be  free  to  take  up  other 
lines  of  activity.  As  to  the  direction  of  such  activity,  we 
can  only  suggest  that  the  trend  of  future  development  Is 
^likely  to  be  along  chemical  rather  than  mechanical  lines. 

In  areas  favored  by  abundant  natural  resources,  and  pro- 
tected by  strong  industrial  and  military  power,  future  in- 
dustrial growth  will  tend  to  lessen  class  friction,  rather  than 
to  increase  it.  But  the  fact  that  France,  Britain  and  Amer- 
ica, under  such  conditions,  are  likely  to  develop  politically 
as  pure  democracies,  with  a  large  measure  of  individual 
freedom  and  activity,  should  not  blind  us  to  the  fact  that 
there  are  other  nations,  not  so  favored,  whose  develop- 
ment may  take  other  courses.  It  Is  questionable,  for  ex- 
ample, if  the  reaction  from  a  broken-down  autocracy  in 
Russia,  Germany  or  Japan  will  result  in  a  government  demo- 
cratic in  form,  for  in  each  case  there  are  natural  or  arti- 
ficial limitations,  at  present,  on  the  economic  possibilities  of 
these  nations;  and  these  limitations  tend  to  lower  the  aver- 
age of  well-being,  and  to  increase  class  friction.  We  are 
likely,  then,  in  the  future  to  face  wide  differences  in  political 
ideas  as  well  as  in  prosperity,  between  the  members  of  two 
powerful  groups  of  nations.^ 

In  the  end,  then,  we  come  back  to  the  fact  that  there 
are  very  serious  material  difficulties  in  the  way  of  future 
peace.  These  difficulties  are  of  natural  origin,  being  ulti- 
mately dependent  upon  the  unequal  distribution  of  Import- 
ant natural  resources.  They  may  act  directly,  as  in  the  case 
of  the  coal  of  Westphalia  and  China,  the  iron  of  Lorraine, 
the  oil  of  the  Caspian  and  Caribbean  —  all  of  which  may 
serve  as  immediate  causes  of  war  or  as  the  bases  for  that 
competition  which  is  in  the  end  more  crushing  and  deadly 
than  war.  Or  they  may  act  through  their  effects  upon  po- 
litical development,  so  as  to  create  the  possibihty  of  inter- 
national conflicts. 


INDEX 


Africa,  coal  resources,  io8,  112-113, 
334;  European  rivalries  in,  334; 
future  development,  334,  335;  iron 
ores,  335 

Africa,  South,  coal  resources,  107, 
112,  115,  327,  335;  economic  de- 
velopment, 335;  gold  output,  151; 
iron,  327 

Air  transport,  209,  218 

Alabama  iron  ores,   57 

Aluminum,  67,  155-157,  161-164,  175- 
176 

America,  North,  coal  resources,  io8, 
112-113;  development  of,  17-47 1 
iron  production,  32-33;  petroleum 
reserves,  127-128;  trade  with  Great 
Britain,  22-23 ;  see  also  United- 
States  of  America 

America,  South,  aluminum  ore,  336; 
coal  resources,  io8,  112,  115,  326- 
328;  economic  future,  335-336;  iron 
ores,  336;  petroleum,  129,  336-337*. 
quicksilver  mines,  172 

Analine  dyes,  see  Coal  Tar  products 

Animal  products,  214,  227 

Anthracite  coal,  see  Coal 

Arbitration,  251 

Argentan,  173 

Argentina,  economic  future,  336; 
population,  336-337 

Asia,  awakening  in,  68-69;  coal  re- 
sources, 108,  112-114,  343-344; 
economic  future,  339-345;  economic 
menace,  71 ;  industrial  history,  68- 
73;, iron  ores,  343-344;  misinfor- 
mation regarding,  69-70;  petrole- 
um supplies,  130 

Australia,  coal  resources,  108,  112, 
ii5»  338;  economic  future,  338; 
gold    discoveries,    145 ;    iron    ores, 

338      ■ 
Austria-Hungary,  coal   resources,   114 

Bauxite,  16a,  163,  336;  see  also  alum- 
inum 

Belgium,  child  labor  in,  247 ;  coal  re- 
sources, 114;  industrial  develop- 
ment, 331-332;  industrial  disaster 
in,  78-79 ;  invasion  of,  78-79 

Bolivia,  tin   production  of,   170 

Brazil,  economic  future,  337;  iron 
ore  supplies,  140,  337;  manufac- 
turing in,  133 ;  water  power,  337 

371 


British-American  trade  balance,  23 
British  Empire,  future  trade  relations 
of,  325-328;  see  also  Great  Britain 
Building  stone,  182 

California,  gold  in,  14,  38,  143-144, 
240 

Canada,  coal  resources,  113,  327;  eco- 
nomic future,  327 ;  iron  ore  sup- 
plies, 327;   nickel  supplies,  174 

Canals,  207,  218 

Capital  and  Labor,  244-245,  303- 
304;  conflict  between,  244-245 

Caribbean  oil  fields,  129 

Caspian  oil  fields,  130 

Cement,  182,  211-212,  218 

Charcoal,  39 

Chemical  industries,  216-217,  219 

Chemical  materials,  177-182 

Child  labor,  247,  275 

Chile,  coal  resources,  115;  economic 
future,  336;  nitrate  deposits,  179 

China,  coal  resources,  113-114,  343- 
344;  competition  of,  343-345;  eco- 
nomic future,  342-345 ;  iron  and 
steel,    343-344;    nickel    in,    173 

Civilization,  bases  of,  93-98 ;  ma- 
chine, 94-95,  202,  244-245,  350,  361, 
368 

Class  rule,  302-304 

Clay  products,   182 

Clothing  and  textiles,  212-214,  219 

Coal,  anthracite,  33,  108;  as  raw  ma- 
terial, 101-103  ;  bituminous,  33,  79- 
81,  108;  character  and  costs  of, 
110-111;  distribution  of,  106-107, 
112-115;  exhaustion  of,  109-110; 
export  of,  104-106 ;  importance  of, 
95-96;  lignite,  108,  110;  power  in 
1914,  80;  resources  of  world,  99— 
n6;  state  ownership  of  mines, 
98;  uses  of,  99-IOI,  103-104;  world 
output  of,  313;  world  resources, 
108-110,  112;  see  also  under  in- 
dividual countries 

Coal  oil,  102 ;  also  see  petroleum 

Coal  Tar  products,  102-103,  219 

Coke,  39,  101-103,  219 

Cold  storage,  210,  218 

Colombia,  coal  resources,  115,  336; 
economic  future,  335-336;  petrole- 
um deposits,   129 

Combinations,  46,  235-236,  264-266; 


372 


INDEX 


advantages  of,  267-269 ;  causes  of, 
264-266 

Competition,  African,  334-335;  Asi- 
atic, 70-73,  339-340;  Australian, 
338;  British,  325-328;  Chinese, 
343-345;  factors  of,  317-324; 
French,  331-332;  future  of,  325- 
345;  German,  328-331;  Japanese, 
341-342;  Russian,  332-334;  South 
American,    335-337 

Copper,  158-161,  176;  distribution 
of,  158-160;  supplies  of,  155-157 

Corporations,  development  of,  253- 
269 ;  corporation  Act,  N.  J.,  279 

Cotton,  212-213;  output  compared 
with  iron,  214;  spinning  and  weav- 
ing of,  219 

Crises,  financial,  cause  of,  233-236 

Cuba,  iron  ore,  140,  336 

Debt  after  war,  286 
Democracy,   growth  of,   362-364 
Donetz  coal  basin,  333 
Dumping,  practice  of,  320-321 
Dyes,  coal  tar,  see  coal  tar  products 

Electrical  inventions,  205-206,  218 
Electric  power,  133-134,  205,  218 
Emigration    and    immigration,    348- 

349 
England,  see  Great  Britain 
Europe,  coal  resources,  io8,  112,  114- 

115;  iron  ore  supplies,  137,  140 
Exchange,  foreign,  323-324 
Export  trade,   321-323 

Fertilizers,  179,  181-182,  2ii 

Finance  and  war,  83 

Food  supply,  199,  210,  2i8 

France,  aluminum  ore,  67,  162;  coal 
output,  63-66;  coal  resources,  114, 
332;  colonial  empire,  62,  331-332; 
economic  future,  85,  331-332;  ef- 
fect of  World  War,  317;  free  trade 
treaty,  66;  industrial  history,  6i- 
67;  iron  ores,  140,  332;  output  of, 
43,  64-67;  manufactures,  61,  63, 
66-67;  patent  system  in,  222;  phos- 
phate output,  182;  territorial  gains, 
332;  textiles,  64-65,  67 

Free  trade,  13,  275 

Gas  engine,  203,  218 

Gas,  acetylene,  219;  illuminating, 
100,  102,  218;  natural,  131 

Gasoline,   122-123 

Germany,  agriculture  in,  331;  coal 
resources,  107,  114,  329-330;  coal 
production,   51;   coal   tar   products, 


102-103,  330;  economic  future,  85, 
328-331;  government  regulation 
in,  276-278;  industrial  develop- 
ment, 48-60;  internal  improve- 
ments, 52 ;  iron  ores,  60,  329 ;  iron 
production,  43,  52-53,  59-60;  pat- 
ent system,  222;  population  growth, 
50,  195;  potash  deposits,  i8i ;  re- 
habilitation of,  328-331;  state  rail- 
way system,  52 
Gold,  abundance  of,  157;  American 
treasures  of,  143-144;  Australian 
supplies  of,  145 ;  discoveries  of,  38, 
142-147;  future  supply  of,  150- 
152;  industrial  effects  of,  144-150; 
older  supplies  of,  142-143 ;  output 
of,  148,  155-157;  prices  of,  147- 
150;  Russian,   149;   South  African, 

143,  151 

Government,  debts,  286 

Great  Britain,  agriculture,  326 ;  coal 
resources,  107-108,  114;  economic 
future,  325-328 ;  effect  of  World 
War  in,  317;  gold  supplies,  14; 
government  policies  in,  274-276; 
industrial  future  of,  325-328;  in- 
dustrial history  of,  3-16;  industrial 
leadership  of,  13-15;  industrial 
revolution  in,  10-13;  iron  ores, 
140;  iron  output,  3-4,  7-9,  11,  16, 
43 ;  labor  conditions  in,  326-327 ; 
markets,  9-10;  overseas  dominions, 
10,  327 ;  patent  system,  222 ;  petro- 
leum supplies,  327;  textile  indus- 
tries, 5-6;  transportation,  6;  wheat 
prices,    237 ;    world    leadership   of, 

13-15 
Guianas,  the,  335 

Higher  living  standard,  361-362 
Holland,  coal  resources,  114 
Housing,  210,  218 
Hungary,  nickel  supplies  in,  173 


Imperialism,    75 

India,   coal   resources,   114,   327;   im- 
portance of  to  Great  Britain,  328 

Individualism,  passing  of,  290-292 

Industrialism,  and  war,  85-86,  346- 
357;  beginnings  of,  5-7;  causes  and 
effects  of,  87-89 ;  effects  on  labor- 
ing classes,  244-247 ;  evolution  of, 
368-370;  following  World  War, 
285-286,  317;  future  of,  89,  283, 
et  seq.;  growth  of,  305-316;  legis- 
lative helps  and  hindrances  to, 
270-280;  see  also  under  individual 
countries 
Industrial  evolution,  factors  of,  187- 


INDEX 


373 


200,  253-262;  future  of,  358,  et 
seq.;  trend  of,  368-370 

Industrial  revolution,  beginning  of, 
87,  93,  296;  in  America,  30-39,  87; 
in  England,  10-13,  30,  87 

Integration  of  industries,  255,  259; 
advantages  of  259-260;  legal  status 
of,  261-262 

Internationalism,  failure  of,  74-75 ; 
future   of,    366-367 

Internationalist  theories,  340 

Inventions,  incitement  to,  220-224 ; 
effect  of  monopoly  on,  223 ;  under 
socialism,  223 

Invention  and  discovery,  progress  of, 
201-224;  shown  in  chronological 
table,   218-219 

Iron,  abundance  of,  157;  importance 
of,  80-81,  95-96;  output  of,  214, 
157,  313;  price  history,  215-216; 
technical  progress,  214-216;  trade 
in  American  colonies,  17-21 ;  see 
also  individual  countries 

Iron  ores,  annual  production,  U.  S., 
44;  great  region  of,  139-140;  im- 
portance of,  136;  of  Loraine,  56- 
57,  60,  66,  331-332;  state  owner- 
ship of,  98 ;  summary  of  facts,  140- 
141;  total  reserves  of,  136-138;  un- 
equal distribution  of,  97 ;  world  re- 
sources of,  135-140,  157;  see  also 
individual  countries 

Italy,  aluminum  supplies,  162;  py- 
rite  supplies  in,  179;  quicksilver 
supplies  in,  172 

Japan,  coal  resources  of,  114,  341; 
copper  output,  159;  economic  fu- 
ture of,  86,  341-343 ;  effect  of 
World  War  vpon,  317,  342;  indus- 
trial history,  71-73;  iron  ores, 
342 ;  modernization  of,  72-73  ;  raw 
materials  in,  342;  social  condi- 
tions in,  342 

Korea,  342 

Labor,  and  Capital,  see  Capital  and 
Labor;  conditions,  245-248 ;  unions, 
249-252;    unrest,   248-249 

Lake  Superior  iron  ores,  42,   140 

Lead,  164-166,  176;  commercial  uses 
of,  165;  price  history,  165;  world 
output  of,  164-165;  world  re- 
sources of,  154-157 

Leather,  chrome  tanning  of,  218; 
price  of,  228 

Lignite,    108,    110 

Lime,  180 

Linen,  63 


Loraine  iron  ores,  56-57,  60,  66^  140, 
331-332 

Machine  tools,  96,  204 

Machine  civilization,  see  civilization, 

machine 
Machinery,  absence  of,  25;  effect  on 

civilization,     94-96,    201,    et    seq.; 

progress  of,  218-219 
Malay  States,  tin  deposits  of,  170 
Manufactures,  increased  consumption 

of,  196-197 
Markets,  expansion  of,  106,  190-191, 

197-198;     accessory    and    limiting 

factors,  198-199 
Mergers,  see  combinations 
Mercury,  supplies,  see  quicksil'ver 
Metals,  abundance  of,  157-158;  com- 
mercial,   153-176;    output   of,    155- 

156;    precious,    142-152;    also    see 

separate  headings 
Mexico,  petroleum  supplies,  119,  125, 

129 
Militarism,  75 

Minority  leadership,  300-301 
Monopoly,  effect  of,  223 ;  control  of, 

250-251 
Motor  transport,  208,  218-2x9 

Nationalism,  273 ;  in  World  War,  76- 

77;  strength  of,  364-366 
Nations,  struggle  of,  74-86 
New  Caledonia,  nickel  output  of,  173- 

175 
Newfoundland,  coal  supply,  113;  iron 

ores  in,  140 
New  South  Wales,  coal  deposits  in, 

"5,  338 
New  Zealand,  economic  conditions  in, 

338 
Nickel,  155-156,  173-176 
Nitrate  supplies,  179 
Northern  Securities  Case,  279-280 
Norway,  nickel  supplies  of,  173 ;  py- 

rite,  179 

Oil,  see  petroleum 
Open  hearth  process,  see  steel 
Opportunity,    equalization    of,    363- 
366 

Paraguay,  337 

Patent  systems,  222 

Peace,  conditions  of,  347-350;  ob- 
stacles  to,    368-370 

Persia,  petroleum  deposits  in,  130 

Peru,  petroleum  in,  119 

Petroleum,  British  control  of,  130; 
discovery  of,  117;  industry,  growth 
of,    117-131;    industry,    future    of, 


374 


INDEX 


128-130;     products     of,     122;     re- 
sources, U.  S.,  128;  sources  of,  126- 
130;  statistics  of,  1 17-13 1;  supplies 
of,  120-122;  utilization  of,  123 
Phosphates,  supplies  of,  181-182 
Political    beliefs,    progress    of,    288- 

304 

Population,  effect  on  industry,  188- 
193,  307-310;  growth  of,  193-196, 
305-308;    world,    194-196,    305-309 

Potash,  supplies  of,  i8i 

Power,  developments,  218;  mechani- 
cal  increase  of,  201-208 

Precious  metals,  supply  of,  142-152 

Prices,  affected  by  demand  and  sup- 
ply, 225-229 ;  affected  by  gold  out- 
put, 145-150;  average  levels  of, 
231;  booms  and  depressions,  232- 
233 ;  changes  in,  225-243 ;  general 
course  of,  230-239 ;  high,  effects  of, 
241-242 ;  low,  effects  of,  242-243 ; 
war's  effect  upon,  238-239,  315-316 

Protection,   15,   278 

Protective  tariflFs,  35,  37-38,  41,  64, 
338 

Pyrites,  supplies  of,  178-179 

Queensland,  338 
Quicksilver,  155-156,  171-173 

Railroads,  204,  208-209,  218 
Refrigeration,  211,  218 
Regulation,  growth  of,  294-297 
Rumania,  oil  deposits,   327 ;   oil  ship- 
ments, ii8 
Russia,  coal  resources,  114,  333;  eco- 
nomic future  of,   332-334;   exports, 
future,  333;  iron  ores,  333;  petro- 
leum in,  119 

Salt,   180 

Sarre  coal  field,  60,  65,  329,  331 

Scandinavia,  iron  ores,  140 

Sherman  Act,  279 

Siberia,  coal  resources,  114;  gold  out- 
put, 13,   149 

Silver,  145,  152,  155-157 

Socialism,  program  of,  292-294 

Spain,  coal  resources  in,  114;  iron 
ores  in,  140;  lead  output,  164;  py- 
rites in,  178-179;  quicksilver  de- 
posits, 171 

Spelter,   see  zinc 

State  regulation,  294-297 

Steam  engine,  6,  12,  199,  203-205, 
218 

Steamships,  36,  204,  218 

Steam  turbine,  203,  206 

Steel,  and  machinery,  219;  annual 
production  in  U.  S.,  42,  44;  basic 


Bessemer,  60,  219;  Bessemer,  14, 
42,  58-60,  219;  blister,  30;  crucible, 
39,  219;  integration  of  American 
industry.  255-258;  open  hearth, 
42,  219;  power  in  1914,  79;  Sie- 
mans-Martin,  42 ;  Thomas-Gilchrist, 
58-59,  222 

Stone  supplies,  182-183 

Strikes,  250 

Structural  materials,   182-183 

Submarines,    219 

Sulphur,  supplies  of,  178-179 

Sulphuric  acid,  217 

Syndicalism,  75,  293;  in  Russia,  84- 
85 

Tariffs,  35,  37,  41,  338 

Telegraph,  209,  218 

Textiles,  63,  212-214,  219 

Tin,  155-156,  168-171,  176 

Trade,  Asiatic,  66;  colonial,  iron, 
17-21;  conditions  after  war,  285- 
286;  cycles  of,  249;  depression, 
34;  expansion,  324;  export,  321- 
323;  foreign,  rise  of,  318-320 

Trades  unions,  249-251 

Transportation,  ancient  and  modern, 
206-210;  progress  of,  209,  218; 
in  England,  6,  12 

Trusts,  see  combinations 

Turbine,  steam,  203,  209,  218;  water, 
218 

United  States  of  America,  agricul- 
tural production,  46-47  ;  coal  output, 
33-34;  coal  resources,  113;  early 
manufactures,  25-27 ;  exports,  46- 
47;  gold  discovery  in,  38;  gold 
output,  149 ;  government  regula- 
tion in,  278-280;  industrial  history, 
17-47;  industrial  revolution,  31- 
40 ;  iron  exports,  47 ;  iron  ore  sup- 
plies, 15,  17718,  29,  39-40,  42»  140; 
iron  production,  20,  31-33,  44;  iron 
trade  17-22,  36-39;  manufactures, 
46-47;  oil  industry,  130-131;  pat- 
ent system,  222 ;  petroleum  reserves, 
127-128;  phosphate  production, 
182;  political  corruption  in,  45; 
population,  194-195;  steel  industry, 
42-43,  257;  tariffs,  35,  37,  41; 
trusts,  46 ;  wars,  effect  of  in,  40-42 ; 
world  leadership,  43-46 

Uruguay,  337 

Vegetable  products,  214,  228 

Venezuela,  petroleum  in,  129 

Victorian  Age,  74 

Wages,  248-249 

War,  costs  of,  351-355;  economic  in- 


INDEX 


375 


centives  to,  350-351;  effect  upon 
industry,  48,  49,  55,  78-85;  future 
of>  356-3571  industrial  factors 
affecting,    35^-357 

Water  power,  132-133 

Wealth,  ancient  concentration  of, 
143 ;  material,  360-361 

Westphalia  coal,  64 

Wheat,  prices  of  British,  237 

"  White  Man's  Burden,"  68-69 


Wool,  213-214 

World  War,  74-85;  industrial  fac- 
tors affecting,  77-82 ;  industrial  and 
political  consequences  of,  85-86; 
lack  of  prevision  in,  83-84. 

"Yellow  Peril,"  70-71,  340 

Zinc,  155-157,  i66-i68,  176 


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